LEARNING   BY    DOING    SERIES 


STUDENT'S   GUIDE 


TO  ACCOMPANY  THE  ELLIS 


Cabinet  System  of  Teaching  Bookkeeping 


and  Business  Practise 


WHEN  USED  IN  CONNECTION  WITH  THE  CABINET  OF  TRANSACTIONS   PROVIDES 

A  FULL  COURSE  OF  INSTRUCTIONS  IN  BOOKKEEPING  AND  OFFICE 

PRACTISE,  FOR  USE  IN  COMMERCIAL  SCHOOLS 


REVISED  EDITION 
1912 


PUBLISHED    BY 

ELLIS  PUBLISHING  COMPANY 


Home  Office  : 
BATTLE  CREEK.  MICHIGAN 


Branch  Office  : 
SAN  FRANCISCO.  CALIFORNIA 


Copyright,    1910 
By  Ellis  Publishing    Company 


F    UiC 


3E1    ' 


PREFACE 


The  object  of  this  book  is  two-fold:  First,  to  provide  the  student  with  a  full  accompaniment  of  necessary- 
instructions  regarding  the  business  transactions  and  bookkeeping  required  by  his  "Business  Directions  or  Cabinet;" 
and,  Second,  to  afford  him  a  reliable  reference  book  upon  business  affairs  and  bookkeeping  in  general. 

For  greater  convenience,  the  work  has  been  divided  into  two  parts:  Part  I,  containing  the  special  instructions 
pertaining  to  the  student's  work,  and  Part  II,  a  more  general  consideration  of  Bookkeeping  and  business  forms  and 
methods. 

The  book  is  to  be  regarded  as  a  manual  of  bookkeeping  and  business  practise,  rather  than  as  a  systematic 
treatise  on  bookkeeping  as  a  science. 

In  selecting  the  business  and  bookkeeping  methods  to  be  followed  by  the  student,  the  authors  have  endeavored 
to  adhere  to  the  actual  practise  of  the  countingroom.  With  the  beginning  student  more  amplification  is  necessary 
than  would  be  advisable  in  the  economic  administration  of  the  accounts  of  a  real  business;  but  as  soon  as  possible 
the  student  has  been  required  to  do  everything  as  it  would  be  done  in  actual  business.  The  practical  advantages 
of  this  requirement  do  not  need  arguing.  If  the  student  is  to  be  trained  to  do  real  office  work,  he  must  have  such 
work  to  do.  Had  it  been  desired  merely  to  familiarize  him  with  theoretical  bookkeeping,  very  many  of  the  meth- 
ods and  devices  required  in  his  work  could  have  been  dispensed  with;  but  the  basal  idea  of  this  course  of  instruc- 
tion is  that  the  student  "learns  to  do  by  doing"  and  that  this  is  really  the  only  way  for  him  to  learn,  if  his  learning 
is  to  be  put  to  the  test  of  actual  use. 

Of  course,  much  more  variety  has  been  required  in  the  use  of  special  books,  forms  of  balance  sheets,  the  dis- 
posal of  accounts,  etc.,  than  would  be  employed  by  any  one  business  house  in  the  keeping  of  its  accounts,  but  the 
necessity  for  this  variety  is  obvious,  when  it  is  remembered  that  the  student  should  receive  an  "all-round"  training, 
and  not  be  hampered  by  the  narrowness  that  restricts  the  bookkeeper  that  has  been  familiarized  with  but  one  set 
of  bookkeeping  methods. 

With  this  brief  introduction,  the  work  is  submitted  to  the  teachers  of  bookkeeping  and  business  practise,  in 
the  confident  belief  that  they  will  find  in  the  method  here  presented  a  practical  and  logical  means  for  training  com- 
mercial students  to  proficiency  in  the  requirements  of  practical  business  and  bookkeeping. 

Elus  Publishing  Co. 


541747 


TABLE    OF    CONTENTS 


Note. — When   different  pages    with    their    paragraph  references  are  set  in  the  same  line,  the  change  from  para- 
graph No.  to  page  No.  is  indicated  by  a  semicolon;  as  in  Bookkeeping,  pages  1,  par.  1;  211.    211  is  the  page  No. 


Abbreviations,   Commercial    Page     255 

Acceptance   Pages  66,  70 

Accepting  a  Draft  .'. Page  66,  Par.  351 

Accommodation    Papers    Page     103 

Account   Pages  1,  211 

Assessment   Page     186 

Auxiliary    Page     212 

Balance    of    Balances Pages  36,  41 

Balance  of  Personal  Accounts Pages  115-116 

Bank   Account    Pages  63,  120-121 

Bills    Payable    Pages  27,  30,  Par.  204 

Bills    Receivable     Pages  49,  93,  Par.  301 

Bills   Rediscounted    Page    210 

Bonus    Pages  165,  243 

Branch    House    Page  141,  Par.  638 

Capital     Pages  36,  161 

Cash   Pages  20,  46-48,  63,  80-S6 

Classification  of   Pages  35-36,  211-212 

Closing    Pages  35-41,  92-93 

C.  O.  D Page     120 

Collection     Page  103,  Par.  4S9 

Commission     Pages  99,  215 

Concession Page     243 

Controlling..  Pages  147,  Par.  664;  148,  227-228,  240 

Copyright    Page     243 

Dividend     Page     182 

Drayage    Pages  101,  245 

Exchange    Page     104 

Expense     Pages  40,  77,  93 

Franchise     Pages  160,  243 

Freight    Pages  101,  120-121,  245 

Fuel    Page    241 

General    Page    212 

Good  Will    Page     242 

Impersonal    i Page     212 

Imprest    Pages  85-86 

Insolvency   Page     242 

Investment    Pages  34,  36,  40 

Interest   and   Discount Pages  105-106 

Judgment    Page    243 

Lease    Page    243 

License    Page    243 

Liquidation    Page     125 

Loss  and  Gain  Pages  36,  40,  77,  93 

Machinery Page    150 

Manufacturing    Page     150 

Merchandise     Pages  26,  35,  63,  93,  245 

Merchandise    Discount    Pages  76,  245 

Merchandise   Exchange    Pages  103,  244 

Nonspeculative    Page      35 

Non-personal     Page     212 

Personal     Pages  63,  77,  115-116 

Patent    Page    243 

Pay  Roll    Pages  235-236 

Petty  Page    143 

Petty  Cash    Pages  85-86 

Precedence  of  Closing Page    241 

Pivotal   Page    241 

Postage    Page     242 

Proprietor's   Stock    Pages  36,  40,  77,  93 

Rest    Page    163 


Account,   Returned    Mdse Pages  35,  37,  245 

Returns  and  Rebates   Page    244 

Ruling    Page      38 

Sales    Pages  131-132 

Shipment    ' Page     100 

Sinking  Fund   Page     163 

Speculative  Page      35 

Stock    Pages  36,  161,  173 

Subdivision    Page    212 

Summary    Pages  35-36,  212 

Surplus  Fund    Page     182 

Suspended    Page    224 

Suspense     Pages  104,  224 

Trade  Mark   Page  242 

Transferring    Pages  38,  48,  Par.  285 

Transferring  to  New  Ledger,  Pages  38, 48,  Par.  296 

With   Employees    Page    235 

Accountant,  Auditor,  Bookkeeper,  compared. .  .Page    211 

Act  of  God   Page    246 

Acts  of  Bankruptcy   Page    243 

Addition,   Proofs  of  Page    231 

Eleven  Method  Page    231 

Nine   Method    Page    231 

Nineteen  Method  Page'    235 

Seventeen    Method    Page    235 

Thirteen  Method   Page    232 

Unitate   Method   Page    231 

Adjusting  Entries  Page  49,  Par.  295 

Advertising Page  129,  Par.  603 

Annual  Interest    Page    2.18 

Meeting   Page     165 

Antedate    Page  103,  Par.  492 

Answers     Pages  62-63,  70-71,  77-79,  109-110,  126-127 

Application  of  Check  Figure  Proofs Pages  140,  243 

Appropriation  of  Surplus  Fund Page    188 

Arbitration    Page    221 

Articles  of  Incorporation   Pages  159,  171 

Assessment     Page    164 

Book    Pages  185-186 

Notice    Page    186 

Assets  or  Resources  Pages  32,  Par.  222 ;  35 

\ssignee    Page    221 

Assignment    Page    221 

Of  Account  Page    221 

Of  Bill  of  Lading  Pages  225,  246 

On  Back  of  Draft   Page    221 

Assignor    Page    221 

Attention  Page      53 

Auditor    Page    211 

Auxiliary   Books    Page    214 

Balances    Page      77 

Of  Personal  Accounts  Pages  77,  115-116 

Balance   of  Balances    Page      36 

Forms   of    Pages  36,  41,  92,  107,  144 

Balancing  Pass  Book   Page      54 

Balance  Sheet  Pages  32,  41,  59, 92,  107,  144 

Branch    House    Page  142 

Forms  of  Pages  34, 

59,  92,  107,  108,  116,  142,  144,  181,  214,  215,  216 

Preparing    Page      33 

Proof  of  Page      33 

[V] 


VI 


TABLE  OF  CONTENTS 


Bank  Account  on  Check  Stub   Pages  120-121 

Overdrawn    Page  44,  Par.  282 

Bank   Draft    ....Page  66,  Par.  350 

Banking    Pages  198-2.11 

Cash  Book  Page     206 

Certificate  of  Deposit  Register Page    208 

Certified  Check  Register  Page     207 

Collection   Register    Pages  200-201 

Discount   Register    Pages  200-201 

Draft   Register    Page    207 

Journal   Pages  208-209 

National   Banks    Page     198 

Officers    Page     198 

Opening  Entry   Page     199 

Pay  Roll   , Page     210 

Savings   Banks    Page     198 

State    Bank    Page     198 

Bank  Note  Page     226 

Bankruptcy    Page    243 

Be  Orderly  and  Systematic   Page      52 

Best  Way  to  Make  a  Journal  Entry  Page      53 

Bill   Books    Pages  31,  43,  50 

Inspection  of    Page  49,  Par.  303 

Bills  and  Invoices Page  7,  Par     35 

Discounted    Pages  52,  75,  76 

Receipted    Page        8 

With  Discount,  form  of   Pages  52,  75,     76 

Without  Discount,  form  of    Pages  44,     74 

Bills  of  Exchange  Page  104,  Par.  500-503 

Bill  of  Lading,  Assignment  of    Pages  225,  246 

Register    Page      31 

Bills   Payable    Pages  29,  30,  70,  217-219 

Account    Pages  27,  30,  Par.  204 

Controlling  Account  

Pages  147,  Par.  664 ;  148,  227,  22S,  240 

Bills   Receivable  Account    Page  49,  Par.  301 

Controlling   Account    Pages  227-228,  240 

Register    Page      50 

Bills  Rediscounted  Page     210 

Blank    Indorsements    Pages  96,  Par.  436;  222 

Blotter • Page     242 

Bookkeeping Pages  1,  Par.  1 ;  211 

Double    Entry    Pages  1,  211 

Laws  of  Double   Entry    Page  3,  Par.  15 

Principles  of  Double  Entry   Page  3,  Par.  15 

Primitive     Page     212 

Single   Entry    Pages  1,  121 

Bookkeeper's    Addition    Page    231 

Qualifications   Pages  2, 

53,  Par.  325;  54,  Par.  336;  55,  Par.  342,  343 

Trinity    Page     21 3 

Books,    Auxiliary    Page    214 

Of   Account    Page  1,  Par.      1 

Of  Original  Entry  ...Pages  1,  Par.  2;  96,  Par.  432 

Of  Subsequent  Entry    Page  1,  Par.        3 

Reference    Page    230 

Two  Sets  of  Corporate Page     166 

Bonus    Pages  165,  243 

Borrowing  Money  Page    227 

To  Pay  Dividends  Page     185 

Branch  House   Pages  141,  142 

Account Page  141,  Par.  638 

Balance   Sheet  Page     142 

Bills    Page  141,  Par.  640 

Books    Page  141,  Par.  642 

Duplicate   Records    Page  142,  Par.  642 


Branch  House,   Loose-Leaf   Records. Page  142,  Par.  642 

Loss  and  Gain  Page  141,  Par.  641 

Prices Page  141,  Par.  639 

Business    Page    211 

And  Financial  Statements Page    214 

Ciphers  and  Codes    Page    225 

Papers   in   General    Page     217 

Transactions     Page  1,  Par.        1 

By-Laws    Page     165 

Capital  Stock Pages  3,  Par.  17 ;  35,  38,  161 

Account     .Pages  3,  Par.  17;  36,  38,  40,  93,  173-174 

Closing • Pages  35,  36,  39,  40,  93,  186-187 

Opening Pages  3,  Par.  17 ;  173-174 

Operating    Page    162 

Working    Page     162 

Carriers     Page    246 

Classes  of  Page     246 

Liability   of    Page     246 

Responsibility    Page     247 

Cash   Account   Pages  15-18,  80 

Closing    Pages  20,  Par.  119 ;  80,    Par.  391 

Form  of  Page  20,  Par.  121 

How  to  Balance   Pages  46-48 

How  to  Forward   Pages  46-48 

How  to  Transfer  to  Cash  Book ; 

Page    80,    Par.     392 

In  Ledger  '. Pages  20,  46-48 

Petty   Pages  80,  85-86 

Cash,  what  is,  in  Bookkeeping.  .Pages  63,  80,  Par.       386 

And  Bank  Account  Page      63 

Balance  Page  99,  Par.      438 

Sales    Page    240 

Cash  Book   Pages  80-86 

Balancing  or  Closing.  .Pages  80,  Par.  390,  391;  125 

Columnar   Pages  118,  Par.  560 ;  149 

Containing    Bank    Account    Page     113 

Daily  Balance   Page      84 

Entries  in,  How  to  Make Page  80,  Par.  387-388 

Examination     Page       SG 

Form   of    Pages  82-83 

Posting  from  credit  side   Page  80,  Par.  388 

Posting  from  debit  side  Page  80,  Par.  387 

Single-  Entry   Page     123 

Special  Column   : Pages  119,  134-139,  149 

Testing    Page      81 

Three  ways  to  use  two-column    Pages  80-81 

Certified   Check   Register    Page     207 

Certificate  of  Deposit   Page     105 

Register    Page     208 

Changing  Partnership  to  Corporation   Pages  183-184 

Corporation  to  Single  Proprietorship  Pages  183-184 

Double  Entry  to  Single  Entry •.  . . .  Page     125 

Single  Entry  to  Double  Entry  Page     125 

Change   List    Page     235 

Charges    Page     129 

Tickets  Page  112,  Par.  525 

Charter  Pages  159,  160 

Chattels   Page  99,  Par.  441 

Checks Pages  4-7 

As  Receipt  Page  6,  Par.  32 

Form  of  Page  5,  Par.  27 

How  to  Write  less  than  $1 Page  5,  Par.  23 

How  to  Write  so  cannot  be  "raised"  Page^5,  Par.  20 

Resembling  Drafts Page  7,  Par.  34 

Returned   ' P^ge  99,  Par.  447 


TABLE  OF  CONTENTS 


VII 


Checking   a    Statement    Page      67 

Your   Posting    Page      54 

Check  Figure  Proofs  Pages  140,  231-234 

Choice  of  Stock   Pages  160-161 

Ciphers Page  7,  Par.  37 

Claims,  How  to   Make    ■. . .  Page    247 

Classification  of  Accounts   .... .  -. Pages  35-36,  211-212 

Of  Ledgers Pages  227,  240 

Clearing  House Page .  241 

Closing  Accounts   Pages  19,  Par.  109 ;  35-41 

At  Liquidation    Page     125 

Books Pages  35-41 

By  Journal  Entries    Pages  37-41 

Cash  Account  Page  20,  Par.  119 

Corporation  Books  Pages  181,  195 

Direct,  without  Journal  Entries.  .Pages  35-36,  92-93 

Steps  in  ' Page  92,  Par.  413 

C.   O.   D.    Delivery   Tickets    Page     120 

Orders    Page     120 

Register     .' Page     120 

Sales   Book    Page     120 

Coin    Page     226 

Collections   Page  103,  Par.  486 

Account Page  103,  Par.  489 

Collection    Register    Pages  200-201 

Column  Journal  Page  89,  Par.  399 

Footings   Page  89,  Par.  402 

Headings   Page  133,  Par.  632 

Postings   Page  118,  Par.  560 

Combined  Journal  and  Day  Book  Page    214 

Commercial  Abbreviations    Page     255 

Agencies    .  .  Page     229 

Commission   Page  99,  Par.  451 ;  245 

Account    Page     245 

Business    Page     128 

Cash  Book   Page     129 

Charges     Page     129 

Sales    Book    Page     130 

Sales  Ledger  Page     131 

Comparing  Cash  Book  and  Banking  Ledger. ..  Page       42 

Complete  Each  Day's  Work Page      55 

Conducting  Business  by  Correspondence 

Page  101,   Par.  470-489 

Consignee,    Consignor Page  99,  Par.  450 

Consignment  Account   Page  128,  Par.  595 

Consolidation  of  Corporations   Pages  193-195 

Constant  Attention    Page       53 

Contingent  Fund    Page     163 

Continued  Trial   Balance    Page     126 

Controlling   Accounts    

Pages  147,   Par.  664 ;   148,  227-228,  240 

Interest    Page     241 

Cooperage  Page  129,  Par.  604 

Copartnership  Agreement    Pages  94-96 

Filing   Page  96,   Par.  431 

Copying  Letters   Page     225 

Copyright    Page     243 

Corporations   Pages  158-197 

Changed  to   Proprietorship    Page     187 

Compared  with  Partnership  Page     158 

Corporate  Seal   Page     166 

Signature Page     166 

Corrections— How  to  Make  Page  49,  Par.  296-299 

Cost   Accounting    Page     237 

Counter  Entries  Page  49,  Par.  293 

Credit Page  2,  Par.  12 ;  211 


Cross  Entry Page  49,  Par.  294 

Cumulative  Voting   Page     162 

Customers'  Ledger   Page  111,  Par.  515 

Daily  Cash  Balance  Book Page      84 

Deposits  Page  44,  Par.  281 

Reminder  Page  53,  Par.  322 

Trial  Balance  Page  54,  Par.  336 

Day  Book  Page  121,  Par.  569 

Explanation  Page  121,  Par.  570 

Form  of Page     122 

Opening  Entry  Page  123,  Par.  573 

Book  and  Journal  Combined Page    214 

Days  of  Grace Page  30,  Par.  200 

Debit  Page  2,  Par.  11 ;  211 

Deferred   Stock    Page     161 

Deficiency  Account   Page    215 

Denominations  Required  Page    235 

Deposits  Page  9,  Par.  43 ;  49,  Par.  300 

Daily   Page  44,  Par.  281 

Deposit  Slips  . .  < Page  9,  Par.  46 

Use  of  Page    226 

Directions  for  First  Posting  Pages  13-18 

For  Second  Posting   Pages  28-29 

For  Third  Posting   Page      32 

For  Closing  Books   Page      55 

Discount  Pages  80,  Par.  392 ;  105,  Par.  508 

Disposal   of Page    224 

For  Advance  Payments Page  129,  Par.  605 

Mdse   Pages  76,  Par.  383 ;  245 

Rates  Page  44,  Par.  284 

Register   Pages  200-201 

Time   Page  75,  Par.  381 

Trade Page  73,  Par.  376 

Dishonoring  Drafts  Page  67,  Par.  355 

Discounting  Notes  at  Bank  Page  73,  Par.  370 

Disposal  of  Discounts   Page    224 

Of  Notes  when  Paid Page  31,  Par.  210 

Dissolution  of  Corporations   Pages  160,  186 

Of  Partnership   Pages  114-115 

Dividend   Pages  162-163 

Account   Page    182 

Borrowing  Money  to  Pay   Page     185 

Certificate    Page     163 

Crediting   Page     185 

Declaring Page     163 

Fictitious   Page     163 

Preferred    Page     163 

Receipt   Book    Page    182 

Stock    Page     163 

To  Pass Page     163 

Double  Entry  Bookkeeping Page  1,  Par.  6 ;  211 

Draft    Pages    65-67 

Bank Page  66,  Par.  350 

Dishonoring Page  67,  Par.  355 

Drawee,  Drawer  Page  65,  Par.  346 

Drawn  after  Date Page  67,  Par.  354 

Drawn  after  Sight Page  67,  Par.  353 

Form   Page  65,  Par.  347-348 

How  to  Write   Page  65,  Par.  346 

Including  Exchange    Page     226 

Parties  to  Page  65,  Par.  346 

Sight  Page  65,  Par.  347 

Theory  of  Page  65,  Par.  346 

Time   Page  65,  Par.  345 

Drayage  Page  101,  Par.  464 

Account     Page    245 


snii 


TABLE  OF  CONTENTS 


Dry  Goods  Business  Page     118 

Due   Bills    Page     217 

Duplicates   Pages  8,  Par.  42 ;  72,  Par.  367-363 

Eleven  Method  of  Proof Pages  140,  231-238 

Enclosures  Page  102,  Par.  481 

Endorsee    Page    223 

Endorser  Page  29,  Par.  190 

Entering  Railroad  Claims  Page    247 

Entry Pages  1,  Par.  9 ;  211 

Adjusting  Page  49,  Par.  295 

Best  Way  to  Make  Page  53,  Par.  326 

Closing  Page  39,  Par.  250 

Counter   Page  49,  Par.  293 

Cross  Page  49,  Par.  294 

Double  Page  1,  Par.  6 

Explanation  of  7 

Pages  1,  Par.  9 ;  48,  Par.  292 ;  121,  Par.  570 

How  Made  Page  3,  Par.  15 

Single   Pages  1,  Par.  7;  121,  Par.  570 

Transfer  Page  143,  Par.  647 

Equated  Date Page  128,  Par.  596 

Errors— How  to  Find   Page    238 

How  to  Prevent  Page     239 

Examinations  Pages  61,  70,  86,  109,  117,  196,  197 

Exchange Page  104,  Par.   497 

Exchanging  Merchandise  Pages  103,  Par.  490 ;  244 

Exercises  in  Journalizing  . .  Pages  63,  71,  79,  110,  126,  127 

Expense  Account   Page      77 

Explanation  of  Entries Pages  1,  Par.  9;  48,  Par.  292 

Express  and  Telegraph  Orders    Page    227 

Extensions  Page  7,  Par.  38 

Fictitious  Dividend   Page     163 

Payee  Page  103,  Par.  491 

Figures  and  Penmanship Page  48,  Par.  291 

Filing  Articles  of  Agreement  Page  96,  Par.  431 

Commercial  Papers  Page  8,  Par.  40 

Invoices   Pages  42-43,  145,  Par.  658 

Letters  Pages  102,  Par.  483 ;  225 

Papers   Page  102,   Par.   484 

Financial  Exhibits   Pages  34,  59, 

92,  107,  108,  116,  142,  144,  181,  188,  214,  215,  216 

Quantity    Page     211 

Firm  Name   Page  94,  Par.  415 

First  Opening  of  Books    Page     241 

Folio Page  13,  Par.  61 

Footing  Tests    Page     202 

Forfeited  Stock    Page     175 

Form  of  Bill  without  Discount  Page      44 

With  Discount   Pages  52,  75,  76 

Of  Promissory  Note  Page  30,  Par.  203 

Of  Statement  of  Account   Pages  68-69 

Forwarding  Footings  Page  44,  Par.  283 

Four-Column  Journal Pages  89,  Par.  400 ;  90-91 

Fractional  Parts  of  a  Cent   Page  52,  Par.  321 

Franchise    Page     160 

Freight   Account    Page     345 

Claims    Page     246 

Claim   Blank    Page    248 

Drayage,  Express  Page  101,  Par.  464 

Fuel    Page     241 

Fund ,  Contingent   Page     163 

Rest    Page     163 

Reserve    Page     163 

Sinking    Page     163 

Furniture  and  Fixtures  Page  99,  Par.  442 


Gains  page  32,  Par.  226 

Unusual   Page     243 

General  Merchandise  Business   Page     133 

Review,  Pages  62-64,  70-71,  109-110,  126-127,  196-197 

Good  Figures Page  55,  Par.  343 

Good  Will   Pages  241,  242 

How  Measured  Page    242 

Guaranteed   Stock    Page     161 

Guaranty Page     221 

General  Form  of  Page    221 

Indorsed  on  Note  or  Other  Faper Page     221 

Handling  C.  O.  D.  Orders  Page     120 

Hardware Page    121 

Holidays  for  Business  Offices Page  12,  Par.  50 

How  Checks  are  Certified Page     210 

To  Find  Errors  in  Trial  Balance.  ..  .Pages  238-239 

To  Handle  Freight  Claims Pages  247-248 

To  Make  Corrections  Page  49,  Par.  296 

To  Make  Shipments   Page  100,  Par.  460 

To  Close  Shipments Page  100,  Par.  462 

To  Order  Page  8,  Par.    42 

To  Operate  the  Voucher  System. Page  145,  Par.  658 
To  Prevent  Errors  in  Trial  Balance. Pages  239-210 

To  Use  Voucher  Record Page  145,  Par.  659 

To  Write  Notes  Page  29,  Par.  192 

Inclosures   Page  102,  Par.  481 

Indexing  the  Ledger    Page      21 

Indorser  Page  29,  Par.  190 

Indorsee    Page     222 

Indorsement  Pages  9,  44,  222-223 

Imprest  Petty  Cash  Book   Pages  85-86 

Insolvency   Account    Page     242 

Inspection  of  Bill  Register Page  49,  Par.  303 

Installment     Page     164 

Book     Page     183 

Scrip     .  .• Page     164 

Installing  Controlling  Accounts  Pages  227-228 

Insurance  Pages  129,  Par.  601 ;  225 

Interest,  Legal  Rate Pages  76,  Par.  385 ;  80,  Par.  392 

And  Discount  Inventory   Pages  105-106 

On  Note  Page  96,  Par.  437 

Inventory,   Definition    Page       35 

Chattels     Page      60 

Closing   Pages  35,  105-106 

Discount    Pages   105-106 

Expense    Page      60 

Freight    Page      35 

Furniture  and  Fixtures  Page      60 

Interest    Pages   105-106 

Liability  Pages  35,  105-106 

Miscellaneous    : Page    105 

Resource   Page  105-106 

Shipments     Page      60 

Invoice  Page  7,  Par.  35 ;  77 

Book     Page      43 

Form  of Pages  8,  44,  52,  74,  75,  76,  152-156 

Register  and  Tell  Tale  Combined Pages  42-43 

Shipping  Page  100,  Par.  459 

Itemizing  Sales  on  Account  Page      53 

Job  Ticket Page    236 

Jobbing  Business    Page        2 

Joint  Stock  Co Page     196 

Journal   Pages  1,  213 

Forms  of.. Pages  3,  22-25,  37-39,  87,  88,  90,  119,  134 


TABLE  OF   CONTENTS 


IX 


Journal  Entries Pages  2,  22-25,  87-88,  90-91, 

97-98,     119,     134-139,     140,    173,     174,     175, 
184-185,   187,   188,  190,  191,  192,  193,    194,  206, 

Ledger  and  Trial  Balance  Book. Page 

Journalizing Pages  3,  22-25,  63,  71,  79,  110,  126- 

Judgment    Pa§e 

Key  to  Commercial  Rating   . . . Page 

Laws  of  Debit  and  Credit  Page  3,  Par 

Of  Carriers    Page 

Lead  Pencil  Work   Page 

Lease— Short   Form    Page 

Ledger   Pages  1, 

Classification  of   Page 

Closing   Pages  35-41, 

Headings   Page  72,  Par. 

Self-Balancing   Pages  227, 

Transferring  Accounts   from    

Page  48,  Par.  285, 

Legal  Rate  of  Interest  Page  76,  Par. 

Letters  of  Credit   Page 

Liability   Page  32,  Par. 

•  Inventory   Pages  35,  105- 

Of    Corporations    Page 

Limited  Corporations   Page 

Liquidation    Page 

Loan   Page  99,  Par. 

Loss  and  Gain  Account.  .Pages  36,  40,  77,  93,  144,  181, 

Loss  Posted  to  Resource  Account  Page 

Losses  Page  32,  Par. 

Unusual Page 

Mail  Orders   Page  102,  Par. 

Maker  of  Note  Page  29,  Par. 

Machinery   Account    Page 

Manifest Page 

How  to  Make  Out Page 

Manufacturing  Account  Page  150,  Par. 

Market  Value   Page 

Maturity  of  Commercial  Papers. ..  .Page  51,  Par.  307 

Of  Notes  Page  30,  Par. 

Measure  of  Good  Will  Page 

Memorandum  of  Credit  Page 

Mercantile  or  Commercial  Agencies Page 

Terms    Pages    249 

Merchandise  Account  Pages  26-27,  63,  93,  234, 

Closing  Pages  35-41,  93, 

Merchandise  Discount  Pages  76, 

Closing   Pages  35-36, 

Merchandise  Exchange  Account   Page 

Closing   Pages  35-36, 

Merchandise  Retd    Page 

Closing   Pages  35-38, 

Merits  of  Check  Figure  Systems 

Pages  141,  Par.  635-636 ;  231 

Minute  Book   Page 

Miscellaneous,  Questions  and  Answers Page 

Inventory    Page 

Miscellany    Page 

Modern  Forms  and  Methods Page  51,  Par. 

Modified  Voucher  Method  Page 

Money    Page 

For   Pay  Rolls   Page 

National  Bank    Page 

Negotiability    Page 

Negotiable  Words   Page 

Net  Cash  Page  76,  Par. 

Nine-Column  Journal  Pages  118 


213 
202 
127 
243 
230 
,  15 
246 

72 
221 
214 
227 

93 
364 
240 

290 
385 
227 
223 
106 
160 
164 
125 
443 
195 
242 
228 
243 
479 
190 
150 
246 
247 
670 
164 
;  71 

199 
242 
114 
229 
•254 
244 
244 
244 
245 
244 
244 
35 
245 

-234 
167 
78 
105 
240 
315 
157 
226 
210 
198 
217 
217 
384 
-119 


Nine  Method  of  Proof   Page    231 

Nineteen  Method  of  Proof Pages  235,  238 

Ninety-nine  Method  of  Proof  Pages  235,  238 

Nine  Hundred  Ninety-nine  Method  of  Proof.... 

Pages    235,    238 

Notes  Pages  29,  99,  217-219 

Payable  at  Bank  Page  73,  Par.  374 

Promissory   Page  29,  Par.  189 

Receivable   Page  49,  Par.  301 

Renewing  Page  96,  Par.  435 

Omission  in  Consolidating  Companies Page     195 

One  Hundred  One  Method  of  Proof Pages  235,  238 

Thousand  One  Method  Pages  235,  238 

Open  Consignments Page  128,  Par.  598 

Opening  Bank  Books  Page    199 

Books,    Single    Proprietor    

Pages  2,  Par.  14 ;  3,  Par.  15,  17 ;  90 

Corporation    Pages   173-174 

Entry   Pages  2,  3,  Par.  15 ; 

89,  90,  97,  118,  133,  144,  173-174,  190-191,  199,  241 

First    Page     241 

Partnership    Pages   96,   Par.   434 ;   97 

With  Private  and  Stock  Account.  Page  144,  Par.  651 

Operating   Capital    \ Page    162 

Oral  Communication Page  101,  Par.  477 

Orders  Page  8,  Par.  41 ;  219 

Miscellaneous    Page    219 

Purchase Page  8,  Par.  41-42 

Order  Book Page  112,  Par.  524 

Sheet  Page  112,  Par.  525 

Organization  of  Corporations Pages  158-159,  1S9-193 

Outstanding  Shipment  Page  101,  Par.  463 

Overcharges Page    247 

Overdrawing  Bank  Account Page  44,  Par.  282 

Part  Payment  of  Note  Page  51,  Par.  312 

Parties  to  Note  Page  29,  Par.  190 

Partnership  Page  94,  Par.  419 

Par  Value Page     164 

Pass  Book  Page  41,  Par.  265 

And  Banking  Ledger  Compared 

Page  42,  Par.  267-273 

Balancing  Page  54,  Par.  337-341 

Patent    Page     243 

Payee Page  29.  Par.  190 

Pay  Rolls Page     235 

Paying  Teller   Page     198 

F  ersonal  Accounts  Page  73,  Par.  365 

Petty  Account   Pages  142-143 

Cash  Account    " Pages  85-86 

Pivotal  Account  Page    241 

Plant    Page     162 

Postage  Page  102,  Par.  480 

Account   ' Page     242 

Postdate   Page  103,  Par.  493 

Posting Pages  13,  28,  32 

Commission  Charges Page  129,  Par.  610 

First    Page      13 

From  Cash   Book 

Page  80,  Par.  387,  388,  389,  392,  397 

From  Columnar  Journal  Page  89,  Par.  403 

From  Nine-Column  Journal Page  118,  Par.  560 

From   Petty  Cash  Book Page      85 

From  Purchase  Book Page  43,  Par.  279 

From  Sales  Book Page  56,  Par.  344 

From  Single  Entry  Books Page  123,  Par.  571 


TABLE  OF  CONTENTS 


Posting,   From    Sixteen-Column   Journal 

Pages  133,  Par.  623  ;  140,  Par.  623 

From  Voucher  Record 

Pages  146,  Par.  662 ;  147,  664 

Important  Points Page  72,  Par.  365 

Proofs  of  Pages  140,  231-235,  238-240 

Second   -. Page      28 

Third    Page      32 

Postoffice   Money  Order Page     226 

Powers  of  Corporations Page     159 

Power  of  Attorney  Page     242 

Precedence  of  Closing  Accounts  Page     241 

Preferred  Stock Page     161 

Prepaying   Your   Own    Note Page      73 

Preparing  a  Balance   Sheet Page      33 

Present  Worth   Page  32,  Par.  224 

Primitive   Bookkeeping    Page     212 

Principles  of  Double  Entry  Bookkeeping 

Page  3,  Par.  15 

Private  Account   Pages  89,  143-144 

Bank  Account Page  144,  Par.  652 

Bank   Page     198 

Closing   Page  143,  Par.  650 

Cost  Mark  Page     224 

Ledger   Pages  227-228 

Opening Pages  89,  Par.  408 ;  144,  Par.  651 

Transfer  Entry Page  143,  Par.  647 

Proceeds Page  99,  Par.  452 

Produce  and  Provision  Business Page      94 

Promissory  Notes Pages  29,  Par.  189;  99,  217-219 

Proofs  of  Addition   - Page     231 

Bookkeeper's  Method  Page    231 

Eleven    Method    Page    232 

Nine    Method    Page    231 

Nineteen  Method  Page     235 

Seventeen  Method  Page     235 

Thirteen  Method   Page    232 

Unitate   Method    Page  ,  231 

Of  Posting Pages  124,  140,  231-235,  238-241 

Proprietors    Stock   Account Pages  36,  77 

Purchase   Book    Pages  43,  111 

Ledger    Page     228 

Order   Page  8,  Par.  41 

Questions  and  Answers   • 

Pages  62-63,   70-71,   77-79,   109-110,   126-127 

Quorum   Pages  162,  165 

Railroad  Claims   Page     247, 

Rate  of  Commission  Page  128,  Par.  594 

Reasons  for  Making  Shipments Page  100,  Par.  453 

For  Using  Red  Ink  Page      36 

Rebates  and  Returns   Page  244 

Receipts   [ Pages  88,  219-221 

Receiving  Book   Page    131 

Teller    Page    198 

Reference  Book  Page    230 

Registered  Letters  Page    226 

Regular  Meeting   Page     165 

Renewing  Notes Page  96,  Par.  435 

Reserve  Fund   Page     163 

Resources  or  Assets Page  32,  Par.  222 

Rest  Account    Page     163 

Retail  C.  O.  D.  Orders  Page    120 

Retail  Hardware  Business Page     121 

Returned  Checks  Page  99,  Par.  447 

Returned  Merchandise  Pages  35,  36,  244 

Returns  and  Rebates  Page    244 


Review    

Pages  62-64,  70-71,  77-79,  109-110,  126-127,  196-197 

Ruling    Exercise    Page      45 

Suggestions  on Page      38 

Safeguard  Check  Systems. .  .Pages  140,  Par.  633;  231-234' 

Application    Pages   140,   231-234 

Trial  Balance  by   Page    234 

Sales  Book  Pages  56-58,  112,  Par.  526 

Common  Form    Pages  57-58 

Journal    Page     112 

Ledger     Page     228 

Special   Form   Pages  150-151 

Sale  Subject  to  Draft Page  103,  Par.  485 

Savings  Bank    Page    198 

Self-Balancing  or  Self-Proving  Ledgers. .  .Pages  227,  240 

Settling  Date Page  12,  Par.  54 

Seventeen  Check  Figure  Method    Page    235 

Shipments     Page      99 

Commission  Page  99,  Par.  451 

Consignee,  Consignor   Page  99,  Par.  450 

How  to  Make  Page  100,  Par.  460 

In   Bond    Page    246 

Invoice   Page  100,  Par.  459 

Receipt  Page  100,  Par.  456 

Shipment  Account  Page  100,  Par.  454 

Shipping  Goods Page  102,  Par.  482 

C.  O.  D.  by  Express  Page     120 

C.  O.  D.  by  Freight Page    120 

In   Bond    Page    246 

Invoice  Page  100,  Par.  459 

Receipt   Page  100,  Par.  456 

Signature  at  Bank Page        4 

Book     Page        4 

Card Page        4 

Corporate    Page     166 

Individual     Page    241 

Single  Entry  Bookkeeping Pages  1,  121-125 

Account Page  123,  Par.  579 

Balance  Sheet  Page  124,  Par.  582 

Books   Pages  121-123 

Cash  Book  Page  123,  Par.  575 

Changing  from  Single  to  Double. Page  125,  Par.  589 
Changing  from  Double  to  Single. Page  125,  Par.  591 

Day  Book  Page  121,  Par.  569 

Journal   Page  121,  Par.  570 

Ledger   Page  123,  Par.  578 

Opening  Entry  Page  123,  Par.  573 

Sinking  Fund    Page    163 

Six-Column  Journal    Pages  96-98 

Sixteen-Column  Journal    Pages  133-140 

Special  Column  Cash  Book Page    149 

Spot   Cash    Page    243 

Statement  of  Account '.....  Page      67 

Forms  of  Pages  68-69 

Of  Affairs    Page    215 

State    Bank    Page     198 

Steps  in  Closing  Books  Page      92 

Stipulation  as  to  Value  of  Goods   Page    246 

Stock  Page  94,  Par.  416 

Canceled    Page     187 

Capital     Page     161 

Certificate    Page    170 

Certificate  Book   Page     169 

Choice  of Page     160 

Common    Page     161 

Deferred  ,.,,...,,.,.., Page    161 


TABLE  OF  CONTENTS 


XI 


Stock  Dividend    Page     163 

Exchange    Page     164 

Forfeited     Page    175 

Guaranteed    Page    161 

Journal    Pages   176-177 

Ledger Pages  178-180 

Non-assessable    Page     161 

Ordinary Page     161 

Preferred    Page     161 

Sold  at  Discount  Page     175 

Sold  at  Par  Page     174 

Sold  at  Premium  Page     175 

Surrendering    Page    187 

Subscription  Book Page     169 

Transferring    Page     187 

Treasury     Page    161 

Wanted  ' Page    161 

Stockholder    Page     162 

Stoppage  in  Transitu   Page    246 

Storage    Page     129 

Subdivision  of  Accounts   Page     212 

Suggestions  on  Ruling   Page      38 

Summary  Account  Pages  35-36 

Surplus  Fund   Page     163 

Account    , Page     182 

Appropriation    Page     188 

Suspense  Account Pages  104,  224 

Suspended  Account  Page    224 

Syndicate    Page     165 

Tanning  Business  Pages  145-157 

Taxes     Page    241 

Testing  Bills  Payable  Account  Page      54 

Bills  Receivable  Account Page      54 

Cash Page      81 

Footings Pages  133,  Par.  625 ;  145,  Par.  655 

Merchandise  Account  Page      54 

Thirteen  Method  of  Proof  Pages  232-234 

Ticket,  Job    or  Time   Page    236 

Time    Book    Page    235 

Discount  Page  75,  Par.  381-382 

Register  Clock   Page     236 

Trade  Discount  Page  73,  Par.  376 

Mark    Page    242 

Transfer  Book   Page     176 

Entry   Page  143,   Par.  647 

Journal    Page     176 

Transferring  Accounts  to  a   New  Ledger 

...,.,. Page  48,  Par.  290 


Transferring  Balances  Pages  38,  203 

Footings  Pages  26-27,  38 

Ledger  Accounts  Page  48,  Par.  285 

Stock    Page     187 

Transmission  of  Money    Page    226 

Transpositions    Page    238 

How  to  Find Pages  235,  238 

Transplacements     Page    238 

How  to  Find Pages  235,  238 

Traveling  Expenses    Page     242 

Treasury   Stock    Page     161 

Given  in  Exchange  for  Mdse  Page     185 

Trial  Balance  by  Differences Page  27,  Par.  153 

By   Totals    

Pages  18,  Par.  103;  34,  78,  92,  107,  108,  124,  144 

Continued    Page    126 

Daily  Page  54,  Par.  336 

Form  of Pages  19,  34,  92,  107,  108,  144 

How  to  Take  Pages  19,  28 

Questions  and  Answers  on Page      78 

Trust    Page     164 

Two  Sets  of  Corporate  Books   Page    166 

Unitate   Method  of   Proof Page    231 

Unpaid    Commercial    Papers Page    210 

Unusual   Losses  or  Unusual  Gains    Page    243 

Use  of  Deposit  Slips   Page    226 

of  Note  Stub Page  29,  Par.  191 

Value Page  1,  Par.  10 

Various     Bookkeeping     Methods     and     Require- 
ments     Page    224 

Vocabulary  of  Commercial  Terms  Pages  249-254 

Voting  by  Proxy  Page     162 

By    Stockholders Page    1 62 

Voucher  Record  Page  145,  Par.  655 

Checks   Pages  152-157 

Form  of Pages  146-147 

Posting  from Page  146,  Par.  662-664 

Proof  of  Page  145,  Par.  655-657 

Voucher  System  Pages  145-157 

Applicability  of  Pages  151,  Par.  672 

Closing  Books  of Page  151,  Par.  671 

Modified    Page     157 

Waiver  of  Notice   Page    165 

Waive    Protest    Page    242 

Watered  Stock   Page    161 

Wholesale  C.  O.  D.  Freight  Orders Page     120 

Without  Recourse   Page    223 

Working  or  Operating  Capital Page     162 


If  a  father  wishes  to  give  his  son  a  legacy  better 
than  houses,  lands,  gold  or  silver,  let  him  give  him 
a  practical  business  education. — Horace  Mann. 

Without  a  thorough  and  practical  business 
education,  a  business  man  is  like  a  ship  at  sea 
without  a  compass  or  rudder. — Hon.  W.  T.  Harris, 
Commissioner  of  Education. 


STUDENT'S  GUIDE 


TO  THE 


Ellis  Method  of  Actual  Business  Practise 


DEFINITIONS  AND  PRINCIPLES 

1.  Bookkeeping  in  its  general  sense  is  the  art  of  keeping  a  more  or  less  classified  record  of  the 
values  exchanged  in  business  transactions.  The  record  is  made  on  ruled  forms  or  books,  called 
books  of  account.  The  books  of  account  will  be  described  as  the  student  is  called  on  to  use  them. 
The  Journal  and  the  Ledger  are  the  first  books  to  be  used. 

2.  Journal. — The  word  Journal  comes  from  the  French  "jour,"  which  means  day.  It  is  there- 
fore a  Day  Book,  and  is  often  spoken  of  as  the  Journal-Day  Book  or  Day  Book-Journal.     It  is  the 

.book  in  which  the  transaction  is  first  recorded,  journalized,  put  in  a  bookkeeping  form,  showing  its 
debit  and  its  credit;  and  hence  is  called  a  book  of  "original  entry." 

3.  Ledger. — The  word  Ledger,  from  the  Dutch  "legger,"  to  rest,  means  to  lie,  or  to  rest.  It  is 
the  book  to  which  the  debits  and  the  credits  of  the  several  transactions  are  transferred,  and  grouped 
under  accounts,  each  debit  or  credit  being  collected  under  its  proper  class.  As  entries  are  transferred 
from  other  books  to  the  Ledger,  the  Ledger  is  called  the  book  of  "subsequent  entry." 

4.  Business  Transaction. — A  business  transaction  is  an  exchange  of  values. 

5.  Two  Methods  of  Bookkeeping. — Complete  or  incomplete  classification  gives  rise  to  two 
methods  of  bookkeeping,  Double  Entry  and  Single  Entry. 

6.  Doubly  Entry. — If  the  classification  is  complete  and  the  corresponding  values  received  and 
given  are  named  in  the  record,  the  method  is  called  Double  Entry;  because  for  every  value  received 
the  corresponding  value  given  is  named  in  the  record;  hence  two  entries  or  Double  Entry.  Double 
Entry  is  both  a  science  and  an  art.  It  has  complete  classification.  Double  Entry  Bookkeeping,  then, 
may  be  defined  as  that  method  of  recording  the  values  exchanged  in  business  transactions  in  such 
manner  that  they  will  balance  or  prove  themselves  beyond  a  reasonable  doubt  and  from  which  an 
exhibit  of  the  true  condition  of  a  business  can  be  made.  From  this  it  will  be  seen  that  Double  Entry 
Bookkeeping  is  in  its  entirety  as  a  system  a  mathematical  science  and  is  properly  expressed  in  an 
equation,  as  4=4,  10=10,  x=x.  If  at  any  time  this  equality  is  destroyed  the  books  are  said  to 
be  "  out  of  balance." 

*7.  Single  Entry. — If  the  classification  is  incomplete  and  only  a  value  received  or  a  value  given  is 
named  in  the  record  (and  in  strictly  Single  Entry  only  values  pertaining  to  personal  accounts  are 
recorded) ,  the  method  is  called  Single  Entry ;  because  only  a  value  received  or  a  value  given  is  named 
in  the  record  of  a  simple  transaction.  Single  Entry  can  hardly  be  called  a  science.  It  lacks  the 
complete  classification  of  a  science.  It  also  lacks  the  self-proving  feature  of  Double  Entry.  As  it 
lacks  complete  classification,  its  record  is  not  susceptible  of  full  and  complete  exhibit  of  the  true  con- 
dition of  a  business,  and  it  is  therefore  of  little  value  compared  with  Double  Entry. 

8.  Account. — When  the  names  of  the  several  classes  of  related  values  are  collected  under  a 
common  heading,  the  heading  is  called  an  Account. 

9.  Entry. — An  Entry  is  the  record  of  a  transaction  showing  the  name  of  the  value  received  and 
of  the  value  given  in  Double  Entry;  or  only  the  name  of  the  value  received  or  the  value  given  in 
Single  Entry. 

A  brief  but  clear  explanation  should  accompany  each  entry. 

10.  Value. — Value  is  the  estimated  worth  of  things  or  services,  and  is  measured  by  dollars  and 
cents,  or  the  money  of  the  country  where  the  business  is  conducted.  The  values  received  are  called 
Debits;  the  values  given  are  called  Credits. 

[1] 


■: 


2     •••;'•  JOBBING  BUSINESS 

LaWs.«J-/The'Iaws  of  the  science  of  Double  Entry  Bookkeeping  are  based  on  the  equilibrium  of 
Debits  and  Credits. 

11.  Debit. — To  debit  an  account  (the  name  of  the  value  received)  is  to  write  the  name  of  the 
account  in  the  left-hand  or  debit  position  of  a  ruled  form  or  book  of  account  and  to  set  the  amount 
in  the  left-hand  or  debit  money  column.     The  debit  position  in  the  Journal  is  next  to  the  date  column 

12.  Credit. — To  credit  an  account  (the  name  of  a  value  given)  is  to  write  the  name  of  th<* 
account  in  the  right-hand  or  credit  position  of  a  ruled  form  or  book  of  account  and  to  set  the 
amount  in  the  right-hand  or  credit  money  column.  The  credit  position  in  the  Journal  is  an  inch  or 
an  inch  and  a  half  to  the  right  of  the  date  column. 

Application  of  the  Art — The  specific  directions  for  the  application  of  the  principles  or  laws 
to  the  art  of  Double  Entry  Bookkeeping  will  be  found  in  paragraph  15. 

SPECIAL  SUGGESTIONS 

In  bookkeeping,  as  in  other  things,  it  is  important  to  begin  right.  First  in  importance  is  Neat- 
ness. Rigidly  avoid  finger  marks,  blots,  erasures,  etc.  Keep  your  hands  clean,  and  your  desk  and 
books  free  from  dust.     Remember  that  in  bookkeeping,  slovenliness  is  the  unpardonable  sin. 

Do  not  leave  your  books  open  when  you  are  not  using  them,  and  never  place  a  book  upon  an 
open  book,  or  make  out  business  paper  upon  an  open  book. 

Use  the  blotter  freely,  and  keep  it  under  your  hand  when  you  write.  Use  but  one  side  of  the 
blotter  for  absorbing  ink;  write  the  word  "Up"  on  the  side  on  which  the  hand  is  to  rest. 

Be  careful  to  keep  your  hand  and  pen  in  the  correct  position. 

Use  pen  and  ink  in  all  your  work,  and  avoid  writing  with  too  much,  or  not  enough,  ink  on 
-your  pen. 

In  making  out  papers,  use  the  current  date  (the  date  on  which  you  are  working)  and  your 
own  name. 

Whenever  you  are  in  doubt  about  the  proper  procedure,  consult  your  Guide;  under  no  cir- 
cumstances trouble  your  teacher  about  any  matter  until  you  have  attentively  read  all  instructions 
pertaining  to  it,  and  have  given  your  difficulty  careful  thought. 

Be  methodical  and  orderly  in  taking  care  of  your  books,  stationery,  etc.  Have  a  place  for 
everything  and  keep  it  there. 

In  effecting  a  business  transaction,  there  are  often  several  things  to  be  done;  learn  to  do 
these  in  their  proper  order. 

Follow  your  directions  to  the  letter,  and  never  attempt  to  carry  out  a  direction  until  you 
have  read  the  instructions  concerning  it. 

Constantly  observe  the  above  suggestions,  and  you  will  make  success  certain;  disregard 
these  and  grow  careless,  slovenly,  and  disorderly  in  your  work,  and  you  will  as  surely  fail. 

If  you  have  carefully  read  the  above  instructions,  you  may  turn  to  the  Business  Directions. 


THE  JOBBING  BUSINESS 

13.  For  convenience,  the  first  business  in  which  you  engage  will  be  called  the  Jobbing  Business. 
A  Jobber  is  one  who  buys  merchandise  from  the  manufacturer  and  sells  to  the  retailer.  A  jobber  or 
wholesaler  buys  in  large  or  small  quantities  to  suit  the  convenience  of  his  trade,  and  he  sometimes 
buys  special  orders  for  his  customers.  In  modern  business  there  is  practically  no  difference  between 
the  wholesaler  and  the  jobber,  and  the  terms  are  often  used  interchangeably. 

OPENING  ENTRY 

14.  The  first  procedure  in  bookkeeping  is  to  open  the  books.  This  is  done  by  writing  in  the 
Journal  a  preliminary  statement,  called  an  Opening  Entry.  The  Opening  Entry  formally  sets  forth 
the  name,  conditions,  proprietorship,  and  investments  of  the  business. 

With  the  exception  of  the  date,  place  of  business,  and  name  of  the  proprietor,  the  following  Open- 
ing Entry,  paragraphs  iO  and  17,  is  the  form  required  for  the  Jobbing  Business.  Make  a  copy  of  this 
on  Journal  paper,  using  your  own  name,  town  or  city,  the  current  date,  and  name  and  number  of  the 
street  for  the  business  you  are  to  conduct. 


JOBBING  BUSINESS  3 

The  debits  and  the  credits  are  made  in  accordance  with  the  following  Principles  of  Double  Entry 
Bookkeeping : 

15.  The  Principles  of  Double  Entry  Bookkeeping  (often  called  "Rules  for  Journalizing" 
or  "Laws  of  Debit  and  Credit")  may  be  set  out  under  three  heads,  as  follows: 

(1)  In  Double  Entry  Bookkeeping,  the  debit  entry  (or  entries)  must  equal  the  credit  entry  (or  entries). 

(2)  Debit  (a)  what  comes  into  the  business,  or  (b)  what  costs  the  business;  or  (c)  debit  Resources  and  Losses. 

(3)  Credit  (a)  what  goes  out  of  the  business,  or  (b)  what  produces ;  or  (c)  credit  Liabilities  and  Gains. 

The  required  Journal  entries  for  a  variety  of  transactions  are  given  in  the  various  Journal  forms 
in  this  Guide.     See  below  and  pages  22,  23,  24,  25,  87,  88,  90,  91,  97,  98. 


r~J:  /^0^> 


1.     Cash  is  debited  because  it  "comes  into  the  business."  (2)  (a) 
Par.  15.     Student  is  credit  liecause  he  "produces."     (3)  (b)  Par.  15. 

18.  -t^z^X^ 

~/\Z^rzs^^^r'  /  'rrz^r'  -~^2*f  sZ<?S '/ 

S.  Expense  is  debited  because  it  "costs  the  business."  (2)  (b) 
Par.  15.  Cash  is  credited  because  it  "goes  out  of  the  business."  (3) 
(a)  Par.  15. 

19.  ~&t^d^y 

r>  h  ^,dse  is  debited  because  it  "comes  into  the  business."  (2)  (a) 
I'ar.  15.  Cash  is  credited  because  it  "goes  out  of  the  business."  (3) 
(a)  Par.  15. 


"T^^ZU^-^C^ 


20. 


<fa&0 


j  oo 


<F000 


&0? 


/JUSX 


/oo 


3>0f 


/JZ3  & 


JOBBING  BUSINESS 


SIGNATURES  AT  THE  BANK 

21.  Banks  require  all  depositors  to  leave  their  Signatures  when  making  their  first  deposits,  so  that 
the  bank  may  have  some  absolute  method  of  determining  the  genuineness  of  checks  or  other  paper  offered 
for  payment.  Sometimes  these  signatures  are  kept  in  a  Signature  Book.  In  this  book  the  depositor  places 
his  name  in  full,  his  signature,  his  address,  and  the  date  of  opening  the  account.  The  more  modern  plan 
for  keeping  depositors'  signatures  and  addresses  is  to  have  cards  properly  ruled  for  this  purpose,  the 
depositor  placing  his  signature  on  the  card,  and  the  bank  filling  in  any  other  information  they  desire.  The 
accompanying  forms  illustrate  the  card  method  and  the  book  plan. 

22,  You  should  study  these  very  carefully  because  the  bank  will  require  you  to  leave  your  signature 
when  you  make  your  first  deposit.  It  would  be  well  for  you,  at  this  time,  to  submit  a  signature  to  your 
teacher  for  approval,  that  he  may  assist  you  in  determining  the  best  signature  for  you  to  adopt.  It  is  a 
mistaken  idea  that  a  complicated  signature  with  many  curls  and  turns  is  difficult  to  forge.  The  plain 
signature  without  any  additional  marks  of  any  kind  is  the  most  difficult  to  duplicate.  When  you  determine 
upon  a  method  of  signing  papers,  the  signature  should  never  be  varied,  but  all  papers  should  be  signed 
the  same. 


£4/-?.. 

^ 


yj2 


sJ^^J^ 


X 


AUTHORIZED  SIGNATURE 

{GIVE  OFFICIAL  TITLE  IF  ANT.) 


Name 


.(TiZJk,*. 


z*-r^/ 


Address 


■   */■&/  *Z>jL-r^jt/,6Z,J, 


-V^( J    /KWy  J&iS^dT 


(Savings  Dept.) 


(Commercial  Dept.) 


Signature  Book 

SURNAME 

GIVEN  NAME 

SIGNATURE 

ADDRESS 

DATE 

y^e^^-^trr? 

'^Ve^^s/^, 

^^S^^/c^ 

^/f'-tZzJL'i&tJsr 

^d£^^/(p. 

CHECKS 


23.  A  Check  is  a  written  order  by  a  bank  depositor  directing  the  bank  to  pay  a  specified  amount  to 
some  person  named  in  the  check,  or  to  his  order,  or  to  the  bearer.  If  the  maker  of  a  check  desires  to 
cash  it  himself,  he  should  make  the  check  payable  to  himself,  or  to  cash.  Unless  otherwise  specified, 
checks  are  always  payable  on  demand. 

24.  The  Check-Book  is  a  book  of  blank  checks  from  which  the  depositor  obtains  his  checks  when- 
ever he  wishes  to  draw  money  from  the  bank.  A  check-book  should  be  arranged  so  that  the  checks  may 
be  torn  out,  leaving  a  stub  showing  the  number  of  the  check,  the  date  of  the  check,  to  whose  order  it  is 
payable,  for  what  given,  and  the  amount.  Many  check  stubs  are  ruled  so  as  to  allow  the  keeping  of  the  bank 
account  on  the  check  stub,  which  will  be  done  later  in  the  student's  work.  At  the  present  time,  how- 
ever, the  student  will  keep  his  bank  account  by  means  of  a  Banking  Ledger^  which  is  a  book  specially 
prepared  for  this  work. 


JOBBING  BUSINESS 


CHECKS  —  Continued 

25.  In  writing  a  check,  care  should  be  taken  that  the  body  of  the  check  exactly  agrees  with  the  stub, 
and  the  check  stub  should  always  be  filled  out  before  the  check  itself  is  written.  This  is  done  to  avoid 
error  in  filling  out  the  stub,  as  you  will  not  forget  to  fill  out  the  stub  if  you  write  the  stub  before  you  write 
the  check. 

26.  The  person  to  whom  the  check  is  payable  is  called  the  payee,  and  the  person  who  signs  the 
check  is  called  the  drawer  or  maker.  In  the  following  check  A.  W.  Hill  is  the  payee,  and  H.  B.  Burton 
is  the  maker;  while  the  Merchants  Bank  is  the  payer  of  the  check,  or  the  bank  on  whom  it  is  drawn. 

27.  In  your  present  work  you  will  make  out  all  required  checks  in  accordance  with  the  following 
form;  writing  your  own  town,  state,  and  current  date  in  place  of  "Cincinnati,  Ohio,  Sept.  10,  1909," 
and  the  name  of  the  person  to  whom  you  are  to  give  the  check  instead  of  the  name  of  "A.  W.  Hill"  ; 
and  you  will  sign  your  own  name  exactly  as  you  left  your  signature  at  the  bank,  in  place  of  the 
name  "  H.  B.  Burton." 


No.  of  Check_Z_ 


Bat.  brought  forward 

Am't  Deposited 

Total  in  Bank 

Am' t  of  this  Check 

Balance  in  Bank 


*r/?0o. 


/<?(? 


jA-fCC 


No.^/_ 


^~~t^S^^^^^7j!sA    )tt^\s?>>4rs&*'j4 


I90_£* 


THE  MERCHANTS  BANK 


Pay  to_ 


sZ/sSt(£/A. 


nr^v*^  ^/OO^ 


\^Zr?^s  i^A4^^^^^^tO~ 


DOLLARS 


Important   Points  About  Checks 

28.  You  should  be  careful  in  writing  your  checks  so  that  they  cannot  be  easily  raised.  It  is  a  poor 
policy  to  write  a  check  for  any  amount  smaller  than  $1.00.  If  you  desire  to  write  a  check  for  less  than 
one  dollar,  you  should  write  it  in  accordance  with  the  following  form  : 


No.  of  rtiorl   /^/^. 
To. 


190-^. 


Bat.  drought  forward 

Am't  Deposited 

Total  in  Bank 


Am't  of  this  Check. 
Balance  in  Bank 


<3/J,0 


62(? 


<3f</(? 


J/jf 


& 


^r 


THE  MERCHANTS  BANK 


ioxl^Zj. 


Pay  to_ 


—^^^^r^^^/^y^-^^^  /V-^^, 


29.  In  writing  a  check  or  note,  care  should  be  taken  to  set  the  figures  close  to  the  dollar  sign,  and  to 
begin  well  back  to  the  left  on  the  line  for  writing  the  amount,  so  that  it  will  be  difficult  for  anyone  to  fill 
in  the  blank  space  and  fraudulently  make  the  check  call  for  a  larger  amount  than  it  really  should. 

30.  The  law  says  that  unless  the  drawer  exercises  due  diligence  in  making  out  his  checks,  the  bank 
is  not  held  responsible  in  the  event  of  the  check  being  "  raised." 


6  JOBBING  BUSINESS 

Important  Points  About  Checks  —  Continued 

31.     The  following  form  shows  an  amount  that  could  be  easily  raised  to  a  much  larger  amount, 
and  checks  should  never  be  written  in  this  way. 


Nn    i9& 


(^C2>^£^^^  T9n  tf 


THE!  MERCHANTS  BANK 


Pay  to. 


?^?7^is£y 


S^f7-7>7y- 


.or  vbcarcf^  ft        <-?  " 


C7> 


Dollars 


32.  If  the  drawer  of  a  check  desires  to  do  so,  he  may  specify  on  the  back  of  the  check,  as  in  the 
following  form,  that  for  which  the  check  is  given.  This  may  be  written  on  the  face  of  the  check,  but  it  is 
better  not  to  have  any  writing  not  absolutely^  necessary  on  the  face  of  a  check. 


c^/?y  Wt  190  a 


NTS  BANK 


or  ^earer^  $^7fc? 


Dollars 


JOBBING  BUSINESS  7 

Important   Points  About  Checks  —  Continued 

33.  All  checks  should  be  promptly  cashed  or  deposited  to  the  credit  of  the  holder.  When  the 
maker  of  the  check  is  a  responsible  party  and  his  credit  is  beyond  dispute,  there  would  not  generally 
arise  any  harm  in  holding  his  check  for  a  few  days ;  but  if  a  Check  should  be  held  more  than  a  reasonable 
length  of  time,  and  the  bank  on  which  the  check  was  drawn  failed  in  the  meantime,  the  debt  for  which 
the  check  was  given  would  be  discharged,  provided  the  maker  had  money  on  deposit  at  the  time  the  check 
was  written.  This  court  decision  rests  on  the  ground  that  the  holder  of  the  check  did  not  exercise  due 
diligence  in  obtaining  his  money. 

34.  A  large  number  of  checks  now  in  use  by  business  houses  resemble  drafts.  See  accompany- 
ing form. 


J? AT  TO   THE 


1      i^/p; 


,  Vfif?    DOLLARS 

College  Currency 


Order  ot^  ^Kl?<yJ..  ^yZ^^^^^z^——— - — ~—  $  ct^/^ 

I  \l_^y  Collide  furi-M 

Value  received  and  charge  the  same  to  account  of 


BILLS  AND  INVOICES 

35.  When  you  sell  goods  at  wholesale,  the  buyer  should  be  given  a  complete  list  of  the  goods, 
together  with  the  terms,  prices,  and  discounts  at  which  they  are  sold.  Such  a  list  is  known  either  as  a 
Bill  or  an  Invoice.  When  the  list  is  spoken  of  by  the  buyer,  it  is  usually  called  an  Invoice,  while  the  seller 
generally  speaks  of  it  as  a  Bill,  although  this  distinction  is  not  always  made.  The  term  bill  is  also  used 
broadly  to  denote  any  statement  of  indebtedness  arising  from  property  sold  or  services  rendered.  In  this 
course,  the  lists  of  goods  that  you  purchase,  will  be  called  Invoices,  while  the  lists  of  goods  that  you  sell, 
will  be  called  Bills.  There  is  no  difference  in  form  between  a  bill  of  merchandise  and  an  invoice  of 
merchandise. 

36.  In  billing,  be  sure  that  all  figures  are  written  in  their  proper  places  in  the  columns,  and  in 
such  a  manner  that  figures  of  the  same  order  will  stand  in  vertical  columns,  thus  facilitating  their 
correct  addition. 

Note— When  a  bill  or  invoice  is  paid  at  the  time  of  sale,  it  should  be  receipted  by  the  seller,  who  writes  the 
word  "Paid"  or  "Received  Payment,"  and  signs  his  name  at  the  foot  of  the  bill.  In  case  there  is  not  room  at  the 
foot  of  the  bill,  the  receipt  may  be  written  across  the  face. 

37.  Ciphers. — In  recording  amounts  expressed  in  dollars,  it  is  unnecessary  to  fill  out  the  cent 
column  with  ciphers,  as  it  is  a  waste  of  time  and  serves  no  good  purpose.  This  custom  was  formerly 
observed,  but  is  no  longer  in  vogue  among  practical  accountants.  The  dropping  of  ciphers  applies 
only  to  bills,  invoices,  and  book  entries,  and  not  to  commercial  papers,  or  to  footings  or  extensions  where 
cents  have  been  added  or  subtracted. 

38.  Extensions. —  In  bills  and  invoices,  the  price  of  each  article  accompanies  its  description,  and 
the  first  double  column  to  the  right  is  used  to  record  the  total  cost  of  such  articles.  This  total  cost  is  called 
an  Extension,  and  the  column  containing  it  is  called  the  Extension  Column.  Discounts  are  also  entered 
in  the  Extension  Column,  while  the  last  column  should  contain  only  the  net  amount  of  the  invoice.  The 
illustration  at  the  top  of  page  8  shows  the  common  form  of  Bill,  or  Invoice. 


JOBBING  BUSINESS 


39.     Illustrative  Invoice. 


BOUGHT  OF     H.    B.    BURTON 


TERMS 
No 


^ 


^W^?f 


dealer  in  Gkneral  Merchandise 


ALL  CUIUS    POK   SUORTAOG   OR    DAMAUK    MUST  BE    MADE  ON    RECEIPT  OF"  OOOD9 


Zj2. 


JLJjy^i, 


^L 


d. 


2^r?K 


*>J2 


^£>^6s*4r*/Z  S^^£y^y^^y 


/£{? 


jL 


-&L 


/,$<$ 


,£22. 


Lj^rZ?^£^<zC/ 


^/^S^^^-^y 


(PURCHASE     ORDER) 

No  Goods  Accepted  unless  Conditions  of  this  Order  are  complied  with. 

Always  give  on  Invoice  our  Order  Number,  how  shipped,  and 

number  of  bundles,  bales,  or  boxes. 


Order  No.        29  September   11  ip 

PLATTE  GROCERY  COMPANY 

Dealers  in  all  kinds  of  Staple  and  Fancy  Groceries 


PLYMOUTH,    INDIANA 


To 


COLLEGE  PRODUCE  COMPANY 


40.  Filing  Commercial  Papers. — To  file  papers  is  to  arrange  them  systematically  for  future 
reference.  It  is  very  important  that  the  student  acquire  the  habit  of  properly  and  promptly  dis- 
posing of  all  business  papers  as  soon  as  they  come  into  his  possession.  To  facilitate  your  doing 
this,  several  filing  envelopes  are  furnished,  each  having  printed  instructions  regarding  its  use. 
Upon  receiving  any  business  paper,  make  the  necessary  entry  pertaining  to  it,  if  an  entry  is 
required,  and  then  place  it,  at  once,  in  its  proper  envelope. 

41.  Illustrative  Purchase  Order. — 
The  accompanying  illustration  shows  a 
common  form  of  Purchase  Order. 

42.  Duplicate. — A  carbon  (or  other 
form  of)  duplicate  should  be  kept  of  every 
order,  for  comparison  of  prices,  quantities, 
etc.,  when  the  goods  are  received.  Immedi- 
ately on  receipt  of  the  goods,  both  the 
invoice  and  the  goods  should  be  checked 
wjth  the  duplicate.  It  is  well  to  observe 
some  order  in  checking:  1.  Check  the 
invoice  with  the  order  for  comparison  of 
quantities,  prices,  etc.  2.  Check  the 
goods  with  the  order,  to  note  any  shortage, 
damage,  or  imperfect  condition  of  the  goods. 
3 .  If  any  shortage,  damage  or  imperfection 
or  discrepancy  in  invoice  is  found,  you 
should  immediately  notify  the  wholesale 
house.  Be  explicit  and  as  brief  as  possible 
in  this  letter.  State  exactly  what  the 
shortage,  damage  or  imperfection  is,  and 
in  what  class  of  goods.  State  clearly  wheth- 
er you  want  the  shortage,  etc.,  made  up 
by  additional  shipment,  or  whether  you 
prefer  a  memorandum  of  credit. 

How  to  Order. — In  ordering:  1.  Be  explicit.  State  exactly  what  you  want,  and  in  case  the 
wholesaler  should  not  be  able  to  fill  your  order  exactly,  if  a  substitute  of  any  article  will  be  accepted, 
state  exactly  what  may  be  substituted.  If  ordering  from  catalog,  give  catalog  number  or  give  exact 
title.  2.  State  how  goods  are  to  be  shipped,  as  freight,  express,  etc.,  and  give  transportation  line 
if  oossible.     3-.     Number  your  orders  consecutively.     4.     File  your  duplicate  in  orderly  manner. 


124  Fourth  Street,   Cincinnati,  Ohio 


Please  ship     by  fast  freight,  on  account,  subject  to  3  per 
cent  dis.  if  paid  in  10  days;  otherwise  net. 


10  Brls,  Flour, 


Pork, 


®   $  5.00 


(«       20,00 


e  12 . oo 


10 


Salt,   -    -    -     -    @   4.00 

Platte  Grocery  Company, 

BY  T.   D.   PLATTE. 


JOBBING  BUSINESS 


9 


DEPOSITS 

43.  A  Deposit  is  a  specified  amount  of  cash,  or  its  equivalent  in  checks,  drafts,  etc.,  which  is  left 
with  a  bank  for  safe  keeping.  Any  amount  in  money,  not  exceeding  such  a  deposit,  is  subject  to  with- 
drawal, on  demand,  by  the  depositor,  who  must  give  a  check  for  the  amount,  or  sometimes  in  savings 
banks,  upon  the  presentation  of  the  Pass  Book. 

44.  Indorsement. — When  checks  or  other  commercial  papers  are  to  be  deposited,  they  should  be 
indorsed  by  the  person  depositing  them.  This  enables  the  banker,  at  any  time,  to  ascertain  the  name  of 
the  depositor  of  the  papers.  The  act  of  writing  one's  name  on  the  back  of  a  check  or  other  commercial 
paper  is  called  an  Indorsement.  The  indorsement  should  be  written  about  one  inch  from  the  left-hand 
end.     See  the  accompanying  form: 


HANTS  BANK 


^^^^^y^^y/^^/^^t  190^ 


crz> 


Z^££^ktz^uJ^A^L^ZtaLda^d^  ^ 


saj7     Dollars 


In  College  Currency 


_i_ 


DEPOSITED  WITH 

flerchants   Bank 


FOR    ACCOUNT    OF 


II.   B.   BURTON 


SEPT.   11,   1909. 

All  Checks  and  Drafts  must  be  Indorsed. 


46.  Deposit  Slip — (Often  called  Deposit 
Ticket  or  Deposit  Tag.)  This  is  a  form  furnished  by 
the  bank  and  made  out  by  the  depositor,  and  which 
sets  forth  the  various  items  of  the  deposit. 

Note. — The  description  of  the  Deposit  Slip  and  its  use, 
as  here  given,  refer  to  its  use  in  your  preliminary  work  only. 

4T.  Direction. —  Fill  out  your  Deposit  Slip  in 
accordance  with  the  accompanying  form.  When  your 
Deposit  Slip  is  made  out,  compare  the  entries  and 
amounts  with  the  checks  for  deposit,  making  sure 
that  there  are  no  omissions  or  duplicate  entries,  also, 
that  no  error  has  been  made  in  addition  or  in  count- 
ing currency ;  then  enter  a  copy  of  the  Deposit  Slip 
in  your  Banking  Ledger,  as  the  items  of  the  accom- 
panying Deposit  Slip  are  entered  in  Banking  Ledger 
Form  on  page  10.  Do  no  ruling  in  your  Banking 
Ledger  until  told  to  do  so  in  your  instructions. 

48.  Direction. —  Prepare  your  deposit  for  the 
'banker  by  arranging  the  checks  in  the  order  that  you 
have  entered  them  on  the  Deposit  Slip  ;  then  place 
them  in  the  Pass  Book  with  the  Deposit  Slip,  at  the 
page  where  the  deposit  is  to  be  recorded  by  the 
banker. 

49.  Take  your  Deposit  Slip,  Checks,  and  Pass  Book  to  the  banker,  who  will  enter  the  amount  of 
your  deposit  in  the  Pass  Book  and  return  the  book  to  you. 


Cu  rrency 

Checks 

Amer.  Mdse.  Co 

1 

2 

9 
5 
3 
5 
4 
0 

3 

5 
2 
3 
3 

7 
4 

?>n 

(C                          11                  It 

<(                  II            11 

1 
1 
1 

1 

8 

II                 <<            II 

II                 II           II 

60 

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50.  Holidays  for  Business  Offices. — A  business  office  is  in  a  measure  bound  to  be  open  for  the 
business  of  the  public,  especially  for  the  settlement  of  matured  obligations,  within  certain  recognized 
business  hours  upon  all  business  days  of  the  week,  except  those  recognized  by  law  as  legal  holidays.  The 
law  of  the  different  States  varies,  the  customary  holidays  being: 

51.  January],  February  22,  May  30,  July  4,  and  December  25.  Some  States  observe  February 
12,  Good  Friday,  Labor  Day,  and  the  various  election  days,  either  state  or  national. 

5£.  The  time  for  payment  of  papers  maturing  on  holidays  or  Sunday  greatly  varies  according  to 
custom.  In  some  States  a  paper  maturing  on  these  dates  must  be  paid  the  nearest  business  day  prior 
thereto,  while  in  other  States  payment  is  permitted  on  the  first  business  day  following  the  holiday.  This 
condition  of  affairs  has  resulted  in  large  firms  introducing  into  their  work  a  form  of  notes  and  other 
commercial  paper,  in  which,  instead  of  specifying  a  time  limit  such  as  so  many  days  or  so  many  months 
after  date,  the  actual  date  of  maturity  is  fixed  in  the  paper;  thus,  "on  Jan.  10,  after  date,  no  grace," 
and  papers  so  written  are  payable  on  the  date  specified  and  on  no  other.  In  writing  such  papers, 
particular  care  is  given  that  the  time  shall  be  neither  a  holiday  nor  a  Sunday. 

53.  Particular  care  should  be  observed  when  receiving  commercial  papers,  to  ascertain  whether 
the  papers  should  be  protested  or  not  upon  non-payment.  Many  business  houses  take  the  position 
that  if  a  paper  bears  no  endorsement,  there  is  no  need  to  protest,  but  this  is  not  always  true,  for  there 
are  many  cases  where  the  owner  of  a  commercial  paper  may  desire  it  protested  with  a  view  to  bringing 
suit.  This  is  especially  true  with  banks.  This  may  cause  some  inconvenience  at  times,  and  may  be  the 
means  of  causing  hard  feeling  on  the  part  of  your  customers  toward  you,  hence  you  should  exercise 
great  care  in  this  matter,  and  before  having  your  matured  commercial  paper  protested,  you  should 
present  it  to  the  maker  for  payment,  and  if  he  requests  you  to  hold  same,  and  is  reasonably  good,  it 
is  a  wise  plan  to  do  so  for  a  reasonable  length  of  time.  The  better  plan,  however,  is  to  obtain  at  least  a 
small  payment  and  renew  the  balance  due  by  writing  a  new  note  for  the  amount  still  due,  or  endorsing 
the  amount  paid  on  the  draft,  if  the  commercial  paper  happens  to  be  a  draft. 

54.  Settling  Date. — If  a  regular  "  settling  date  "  has  been  adopted  by  your  school,  be  sure  that 
you  have  all  statements  made  out  and  delivered  on  that  date,  in  accordance  with  the  instructions  of  your 
teacher.  If  no  regular  settling  day  has  been  adopted  you  will  see  that  all  accounts  are  collected  when  they 
mature  according  to  the  dates  of  the  invoices,  and  you  will  pay  all  bills  promptly  so  as  to  obtain  the 
various  discounts. 

55.  Assistance. —  You  are  strictly  forbidden  to  receive  assistance  from  any  student.  Remember 
that  you  are  paying  your  teachers  for  professional  help.  You  are  also  strictly  forbidden  to  give  any 
assistance  to  other  pupils.     You  are  in  school  to  learn  and  not  to  teach. 


JOBBING   BUSINESS  13 

DIRECTIONS  FOR   FIRST  POSTING 

56.  The  various  debit  and  credit  amounts  in  the  books  of  original  entry  are  transferred  daily,  or  at 
other  stated  periods,  to  a  book  called  the  Ledger.     Transferring  these  items  is  technically  called  Posting. 

57.  In  Posting,  we  group  the  various  debits  and  credits  under  their  proper  headings  in  the  Ledger. 
Each  one  of  these  groups  is  called  an  Account.  All  the  debit  and  credit  amounts  relating  to  merchandise 
purchases  and  merchandise  sales  are  posted  to  the  Merchandise  account.  All  entries  relating  to  cash  paid 
out  or  cash  received  are  posted  to  the  Cash  account.  Each  account  in  the  Ledger  has  two  sides,  the 
debit  side  and  the  credit  side.  All  the  debit  amounts  in  the  books  of  original  entry,  that  is,  all  the 
amounts  in  the  left  hand  column  of  the  Journal,  are  posted  to  the  debit  side  of  their  respective  accounts  in 
the  Ledger,  and  all  the  credit  amounts  in  the  books  of  original  entry,  those  in  the  right  hand  column  of 
the  Journal,  are  posted  to  the  credit  side  of  their  respective  accounts  in  the  Ledger.     See  Guide  page  18. 

58.  If  you  have  read  the  preceding  instructions  carefully,  you  may  now  prepare  to  post  the  amounts 
of  your  journal  entries  to  the  Ledger  according  to  the  following  instructions  : 

59.  The  first  entry  in  your  Journal  is  Cash  to  Student,  $5,000.  Cash  is  Debited  and  you  are  Credited 
for  the  amount  of  your  investment.  It  is  the  best  plan  in  posting,  to  post  all  of  the  Debit  items  first  to  their 
respective  accounts,  and  then  to  post  all  of  the  Credit  items  to  their  respective  accounts.  As  Cash  is  the 
first  debit  item  in  your  Journal,  you  will  turn  to  the  second  page  of  the  Ledger  and  write  the  word  Cash 
on  the  light  blue  line  at  the  top  of  the  page,  as  shown  in  Cash  account  No.  1,  Guide  page  15.  To  post 
the  cash  to  this  account  first  enter  the  date  of  the  transaction  as  recorded  in  your  Journal  in  the  date 
column  of  your  Ledger.  Second,  enter  the  journal  page  "1"  in  the  journal  folio  column  of  the  Ledger,  to 
show  where  the  journal  entry  is  found.  Third,  enter  the  amount  in  the  money  column,  the  same  as  the 
$5,000  is  entered  in  the  money  column  in  Cash  account  No.  1,  Guide  page  15. 

60.  When  an  item  is  posted  to  the  Ledger,  the  Ledger  page  is  entered  in  the  ledger  folio  of 
the  book  of  original  entry  opposite  the  item  posted,  to  show  to  which  page  in  the  Ledger  the  item 
has  been  transferred.  This  column  is  located  either  to  the  immediate  right  or  to  the  immediate 
left  of  the  explanation  column  as  shown  below.  Use  whichever  column  your  teacher  prefers.  The 
column  not  used  for  the  ledger  folio  may  be  used  for  the  transaction  number. 

-2.    — &^dJzy  J{0  O  0 


Date 


fooo 


In  books  of  original  entry,  (as  used  in  business  offices),  the  folio  column  (abbreviated  LF)  is  some- 
times placed  next  to  the  day  column  and  sometimes  next  to  the  money  column.  In  the  Ledger  the  folio 
column  (abbreviated  J  F)  is  nearly  always  placed  next  to  the  money  column. 

62.  The  next  debit  amount  in  your  Journal  is  $1 00,  which  should  be  posted  to  the  debit  side  of  the 
Expense  account.  You  will  now  turn  to  ledger  page  3,  and  write  the  word  "Expense"  on  the  light 
blue  line  at  the  top  of  the  page.  Next  enter  the  date  of  the  transaction  in  the  date  column  of  your 
Ledger.  Second,  enter  a  figure  (1)  in  the  journal  folio  column  of  the  Ledger  to  show  the  journal  page 
from  which  the  item  is  transferred.  Third,  enter  the  $100  in  the  dollar  column.  See  account  No.  2, 
Guide  page  15. 

63.  To  show  that  this  item  has  been  transferred  to  the  Ledger,  enter  a  figure  (3),  which  is  the 
ledger  page  to  which  it  was  transferred,  in  the  ledger  folio  column  of  your  Journal  opposite  the  word 
Expense,  just  the  same  as  you  entered  the  figure  (2)  opposite  the  word  Cash  in  the  preceding  entry. 

64.  The  next  debit  amount  in  your  Journal  is  Merchandise  $207,  which  should  be  posted  to  the 
debit  side  of  the  Merchandise  account  in  the  Ledger.  You  will  open  an  account  with  Merchandise  in  the 
Ledger  by  writing  the  word  "  Merchandise"  on  the  light  blue  line  at  the  top  of  Ledger  page  4.  See 
account  No.  3,  Guide  page  16. 

65.  You  may  now  enter  the  date  of  the  transaction  as  recorded  in  your  Journal,  in  the  date  column 
of  the  Ledger,  and  the  journal  page  in  the  journal  folio  column,  and  the  amount,  $207,  in  the  money 
column.  As  the  item  is  now  posted  to  the  Ledger,  you  will  enter  the  ledger  page  4  in  the  ledger  folio 
column  of  the  Journal,  opposite  the  word  Merchandise,  the  same  as  the  figure  2  is  opposite  the  word 
Cash,  and  the  figure  3  is  opposite  the  word  Expense. 


14  JOBBING  BUSINESS 

DIRECTIONS    FOR    FIRST    POSTING  — Continued 

66.  The  next,  debit  amount  in  your  Journal  is  $123. 50,  which  you  will  easily  see  should  be  posted 
to  the  debit  side  of  the  Cash  account  in  your  Ledger.  You  already  have  a  Cash  account  open  in  your 
Ledger,  so  the  only  thing  to  do  is  to  enter  this  amount  in  the  Cash  account  on  ledger  page  2,  immediately 
below  the  entry  of  $5,000.  Be  sure  to  record  the  date  and  the  journal  page  on  which  the  original  entry 
is  found.  See  account  No.  4,  Guide  page  16.  When  you  have  this  amount  posted  to  the  debit  side  of 
the  Cash  account,  be  sure  to  enter  the  ledger  page  2  in  the  ledger  folio  column  of  the  Journal,  to  show  that 
the  item  has  been  posted. 

67.  Post  the  next  debit  amount,  $95,  to  the  debit  side  of  the  Cash  account  in  your  Ledger  on 
page  2.  If  in  doubt  as  to  the  correct  way  to  do  this,  see  account  No.  5,  Guide  page  16.  When  the  item 
is  posted  to  the  debit  side  of  the  Cash  account,  be  sure  to  enter  the  ledger  page  2  in  the  ledger  folio 
column  in  the  Journal  opposite  the  entry,  to  show  that  it  has  been  posted. 

68.  Post  the  next  debit  amount,  $270,  to  the  debit  side  of  the  Merchandise  account  on  page  4  of 
your  Ledger,  the  same  as  the  $270  is  posted  to  the  debit  side  of  account  No.  6,  Guide  page  16.  Be  sure 
to  enter  the  ledger  page  in  the  ledger  folio  column,  to  show  that  the  item  has  been  transferred  to  its  proper 
ledger  account. 

69.  When  you  reach  the  second  page  of  your  Journal,  you  must  remember  to  enter  journal  page  2 
in  the  journal  folio  column  in  the  Ledger.  In  succeeding  postings  always  enter  in  the  journal  folio  column 
of  the  Ledger,  the  page  of  the  Journal  from  which  the  amount  is  posted,  without  being  told  to  do  so  in 
the  directions. 

70.  Post  the  next  debit  amount,  $152,  to  the  debit  side  of  the  Cash  account  on  page  2,  the  same  as 
$152  is  posted  to  the  debit  side  of  account  No.  7,  Guide  page  17. 

71.  Post  the  next  debit  amount,  $133,  to  the  debit  side  of  the  Cash  account  on  ledger  page  2. 
See  the  last  entry  in  account  No.  8,  Guide  page  17;  Be  sure  to  enter  the  ledger  page  in  the  ledger  folio 
column  of  the  Journal,  and  the  journal  page  in  the  journal  folio  column  of  the  Ledger. 

72.  Post  the  next  debit  amount,  $288,  to  the  debit  side  of  the  Merchandise  account  on  page  4.  Be 
sure  to  enter  the  date  as  recorded  in  your  Journal,  and  be  sure  to  enter  the  journal  page  in  the  journal  folio 
column  of  the  Ledger.     See  account  No.  9,  Guide  page  17. 

73.  Post  the  next  amount,  $153.60,  to  the  debit  side  of  the  Cash  account  on  ledger  page  2.  See 
sixth  entry  in  account  No.  10,  Guide  page  17. 

74.  Post  the  next  debit  amount,  $147.20,  to  the  debit  side  of  the  Cash  account  on  ledger  page  2. 
See  the  last  entry  in  account  No.  10,  Guide  page  17.  Do  not  forget  to  enter  the  ledger  page  2  in  the 
ledger  folio  column  in  your  Journal,  to  show  that  this  item  has  been  transferred  to  the  Ledger. 

75.  Now  that  you  have  posted  all  of  the  debit  items  to  your  Ledger  you  will  submit  your  Ledger  to 
your  teacher  for  approval.  When  the  same  is  approved  you  will  continue  your  posting,  and  post  only  the 
credit  amounts  to  the  credit  side  of  their  respective  accounts  in  the  Ledger,  in  accordance  with  the  follow- 
ing instructions  : 

76.  The  first  credit  item  as  recorded  in  the  Journal  is  your  investment  of  $5,000,  which  should  be 
posted  to  the  credit  side  of  your  own  account.  As  you  have  not  yet  opened  an  account  with  yourself  in 
the  Ledger,  you  will  now  turn  to  page  1,  and  write  your  own  name  and  the  word  stock  on  the  light 
blue  line  at  the  top  of  the  page,  as  "  H.  B.  Burton,  Stock,"  is  written  at  the  top  of  account  No.  11, 
Guide  page  18. 

77.  To  post  the  $5,000  credit  to  your  account,  first  enter  the  date  as  recorded  in  your  Journal ; 
second,  enter  the  figure  1  in  the  journal  folio  column  of  the  Ledger,  to  show  on  what  page  in  the  Journal 
this  entry  is  found.  Now,  enter  the  $5,000  in  the  money  column,  just  as  the  $5,000  is  posted  to  the  credit 
side  of  account  No   11,  Guide  page  18. 

78.  Have  you  noticed  in  looking  over  these  Ledger  accounts,  that  the  year  date  is  entered  at  the 
top  of  every  column  ?  If  you  have  not  entered  the  year  date  you  may  do  so  at  once,  and  remember  here- 
after in  all  your  posting  that  the  year  date  should  be  entered  after  every  double  red  ink  ruling,  and  that 
the  year  date  is  just  as  important  as  the  month  and  day. 


JOBBING  BUSINESS 


15 


DIRECTIONS    FOR    FIRST    POSTING  — Continued 

79.  Post  the  next  credit  amount  in  your  Journal,  $100,  to  the  credit  side  of  the  Cash  account  on 
the  second  page  of  your  Ledger,  the  same  as  the  $100  is  posted  to  the  credit  side  of  account  No.  12,  Guide 
page  18.  First,  enter  the  date  as  recorded  in  your  Journal  in  the  date  column.  Second,  enter  the  Journal 
page  1,  in  the  journal  folio  column  of  the  Ledger.  Next,  enter  the  amount,  $100,  in  the  money  column. 
Now,  enter  the  ledger  page  2  in  the  ledger  folio  column  of  the  Journal,  to  show  to  which  page  of  the 
Ledger  this  item  has  been  transferred. 

80.  Post  the  next  credit  amount,  $207,  to  the  credit  side  of  the  Cash  account  on  page  2  of  the 
Ledger,  as  the  $207  is  posted  to  the  credit  side  of  account  No.  12,  Guide  page  18. 

81.  Post  the  next  credit  item,  $123.50,  to  the  credit  side  of  the  Merchandise  account  on  ledger 
page  4,  as  the  $123.50  is  entered  on  the  credit  side  of  account  No.  13,  Guide  page  18.  Do  not  forget  to 
enter  the  ledger  page  in  the  ledger  folio  column  of  the  Journal,  at  the  time  of  posting  the  items  to  their 
respective  accounts  in  the  Ledger.     Hereafter  you  are  expected  to  do  this  without  being  told. 

82.  Post  the  next  credit  amount,  $95,  to  the  credit  side  of  the  Merchandise  account  in  the  Ledger. 
See  second  entry  on  credit  side  of  account  No.  13,  Guide  page  18. 

83.  Post  the  next  credit  amount,  $270,  to  the  credit  of  Cash.  See  third  entry  account  No.  12, 
Guide  page  18. 

84.  Post  the  next  credit  amount,  $152,  to  the  credit  of  Merchandise.  See  third  entry  account 
No.  13,  Guide  page  18. 

85.  Post  the  next  credit  amount,  $133,  to  the  credit  of  Merchandise.  See  fourth  entry  account 
No.  13,  Guide  page  18. 

86.  Post  the  next  credit  amount,  $288,  to  the  credit  of  Cash. 

87.  Post  the  next  credit  amount,  $153.60,  to  the  credit  of  Merchandise. 

88.  Post  the  next  credit  amount,  $147.20,  to  the  credit  of  Merchandise. 

89.  You  will  now  submit  your  Ledger  to  your  teacher  for  approval,  and  when  approved,  you  will 
carry  out  in  detail  the  instructions  for  taking  a  Trial  Balance  and  closing  the  Banking  Ledger  and  Cash 
account,  as  given  in  Guide  pages  18  to  2 1  inclusive. 


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JOBBING   BUSINESS 
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JOBBING    BUSINESS 
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ACCOUNT  NO.  13 


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TRIAL  BALANCE 


103.  A  Trial  Balance  is  a  form  prepared  for  the  purpose  of  testing  the  correctness  of  your  posting. 
It  should  show  that  the  total  debits  in  your  Ledger  equal  the  total  credits  in  your  Ledger.  A  Trial  Balance 
consists  of  a  list  jf  the  Ledger  accounts,  with  the  debit  footings  and  the  credit  footings  of  each  account. 
The  debit  and  credit  columns  of  the  Trial  Balance  are  then  added  to  show  that  the  sums  posted  to  the  debit 
side  of  the  respective  accounts  equal  the  sums  posted  to  the  credit  side  of  the  respective  accounts.  If  the 
two  sides  of  the  Trial  Balance  equal  it  is  reasonable  to  suppose  that  the  amounts  have  been  correctly 
posted  from  the  Book  or  books  of  Original  Entry  to  the  Ledger. 

104.  It  should  be  kept  in  mind,  however,  that  a  Trial  Balance  does  not  absolutely  prove  the 
correctness  of  the  work.  It  proves  only  that  for  every  debit  amount  posted  there  has  been  posted  an 
equal  credit  amount.  Accounts  that  are  in  balance  (if  the  debit  side  of  the  account  equals  the  credit 
side  of  the  account)  may  be  omitted  in  taking  a  Trial  Balance.     Ask  your  teacher  his  preference. 

Trial  Balance  by  Differences  is  described  elsewhere.     See  par.  153. 


JOBBING  BUSINESS 


19 


DIRECTION 

105.  The  first  thing  to  do  in  taking  a  Trial  Balance  is  to  find  the  total  of  each  account  in  the 
Ledger,  writing  the  result  of  each  account  in  small,  light  and  very  plain  figures  underneath  the  last  ink 
figures.  The  object  in  putting  these  footings  in  small  figures  is  so  that  they  will  not  interfere  with  the 
posting  of  additional  amounts. 

106.  Sharpen  your  pencil  to  a  fine  point,  and  add  the  debit  and  the  credit  sides  of  each  Ledger 
account.  When  this  is  done,  take  a  sheet  of  journal  paper  and  write  the  name  of  each  account  in  the 
Ledger  and  the  total  sum  of  the  debits  and  the  total  sum  of  the  credits,  as  shown  by  the  pencil  foot- 
ings. When  writing  the  name  of  the  account  also  place  the  number  of  the  ledger  page  of  each  account 
in  the  day  column  at  the  left,  as  shown  in  the  accompanying  form. 

107.  Now  find  the  total  of  each  column  of  the  Trial  Balance,  the  footings  of  which  should  be  equal. 
If  the  footings  are  not  equal,  compare  your  Trial  Balance  with  the  accompanying  form,  which  will  enable 
you  to  locate  the  account  or  accounts  containing  the  mistake.  I  f  you  have  made  an  error  it  is  more  likely  to 
be  in  adding  or  posting  than  in  any  other  place.  When  you  have  this  Trial  Balance  properly  made  out 
submit  a  copy  of  it  to  your  teacher,  and  when  approved  enter  the  same  on  the  first  page  of  your  Trial 
Balance  book. 


108. 


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7 6s \fo4- 3o 


66^30      &66t?30 


CLOSING  ACCOUNTS 

109.  When  an  account  is  in  balance,  that  is,  when  the  sum  of  the  debit  column  equals  the  sum  of 
the  credit  column,  the  account  should  be  ruled  up  and  closed.  See  Bills  Payable  account,  Guide  page  27. 
Observe  that  the  red  ink  rulings  are  always  placed  on  the  same  line. 

110.  To  close  an  account  that  is  not  in  balance  you  first  find  the  difference  between  the  two  sides  of 
the  account,  which  is  the  balance.  Then  write  the  word  "Balance"  on  the  lesser  side  of  the  account  in 
red  ink.  Then  rule  the  account  the  same  as  an  account  that  is  in  balance,  but  bring  the  balance  down 
below  the  red  ink  ruling  on  the  opposite  side  in  black  ~'nk.     See  account  No.  14,  Guide  page  20. 

111.  You  may  now  close  your  Banking  Ledger  in  accordance  with  the  following  instructions: 

112.  First,  compare  your  Banking  Ledger  with  your  Cash  account.  To  do  this,  it  will  be  necessary 
to  check  the  items  entered  in  your  Banking  Ledger  with  the  items  entered  in  the  Cash  account.  Also  find 
the  difference  between  the  total  amount  of  money  you  have  deposited  and  the  total  amount  of  checks  drawn, 
which  is  the  amount  of  money  you  now  have  on  deposit  at  the  bank,  or  your  Bank  Balance. 

113.  As  your  money  is  all  on  deposit  at  the  bank,  this  Bank  Balance  is  your  Cash  Balance,  which, 
if  your  work  is  correct,  will  agree  with  the  difference  between  the  two  sides  of  your  Cash  account  in  the 
Ledger. 

114.  Ascertain  the  total  debits  and  the  total  credits  of  the  Cash  account  in  your  Ledger,  and  find 
the  difference,  which,  if  you  have  made  no  error,  will  agree  with  your  Cash  Balance  as  shown  by  the  Banking 
Ledger. 

115.  You  may  now  enter  your  Bank  Balance  on  the  credit  side  of  your  Banking  Ledger,  as  the 
Bank  Balance  is  entered  on  the  credit  side  of  the  Banking  Ledger  on  the  following  page. 

116.  Rule  your  Banking  Ledger  as  shown  in  the  accompanying  form  and  bring  the  balance  on 
deposit  below  the  double  red  ink  ruling.  Be  sure  to  write  the  year  date,  the  month  and  the  day  of  the 
month,  and  be  careful  that  you  get  the  figures  in  the  right  column.     Submit  this  to  your  teacher  for  approval. 


20 


JOBBING  BUSINESS 
FORM  OF  BANKING  LEDGER 


117. 


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Tout  Deposit 


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CASH  ACCOUNT  IN  THE  LEDGER 

118.  As  you  probably  understand  by  this  time,  the  Cash  account  in  your  Ledger  is  a  record  of  the 
separate  amounts  of  cash  received  and  a  record  of  the  separate  amounts  of  cash  paid  out.  The  total  of 
the  debit  column  shows  the  total  amount  of  cash  received,  and  the  total  of  the  credit  column  shows  the 
total  of  the  cash  paid  out,  providing  there  are  no  mistakes  in  your  work. 

.  119.  Closing  the  Cash  Account. — The  Cash  account  is  usually  closed  at  the  end  of  every  day's 
business,  but  sometimes  its  closing  is  deferred  until  a  Trial  Balance  is  taken,  but  the  Cash  account  is 
always  closed  at  the  time  of  Closing  the  Books. 

120.  You  may  now  close  the  Cash  Account  in  accordance  with  the  accompanying  form  and  illustrations. 
Enter  the  Cash  Balance  as  shown  by  your  Banking  Ledger  on  the  credit  side  in  red  ink,  the  same  as  the 
Cash  Balance  is  entered  on  the  credit  side  of  the  accompanying  form.  Rule  the  account  in  red  ink 
and  place  the  footings  of  each  column  in  black  ink  below  the  single  red  ink  ruling.  Draw  the  double  red 
ink  ruling  exactly  as  shown  in  the  accompanying  form.  Then  bring  down  the  Cash  Balance  on  the  debit 
side  in  black  ink,  being  sure  to  write  the  date  and  the  word  "  Balance." 


131. 


ACCOUNT  NO.  14 


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JOBBING  BUSINESS 
INDEXING  THE  LEDGER 


21 


122.  It  is  necessary  to  index  all  the  accounts  in  the  Ledger  in  order  that  the  accounts  may  be 
readily  found.  For  this  purpose  several  extra  pages  are  usually  inserted  in  the  front  part  of  the 
Ledger.  Upon  these  pages  the  titles  of  the  accounts  are  written  alphabetically,  a  certain  amount  of 
space  being  reserved  for  each  letter.  This  space  varies  with  the  nature  of  the  business  and  the  num- 
ber of  accounts  that  are  likely  to  be  required.  Your  Ledger  is  so  ruled  that  each  column  of  the  index 
page  is  reserved  for  a  single  letter.  The  letters  to  be  used  in  the  respective  columns  are  indicated  by 
the  capitals  printed  on  the  margin  of  each  right-hand  page.  Thus,  the  letters  A,  B,  C,  D  on  the  first 
of  these  pages  indicate  that  the  first  column  on  the  left  is  for  names  beginning  wi1|h  "A."  The  second 
column  is  for  names  beginning  with  "B."  The  third  column  is  for  names  beginning  with  "C,"  and 
the  fourth  column  is  for  names  beginning  with  "D."  In  the  same  manner  the  next  group  of  letters, 
E,  F,  G,  H,  indicate  the  letters  for  the  next  four  columns,  and  so  on  to  the  end  of  the  index  pages. 

123.  You  may  now  index  your  Ledger,  by  writing  in  their  respective  columns  the  titles  of  the 
accounts,  Cash,  Merchandise,  Expense,  and  your  own  account.  In  your  own  account  write  your 
own  name,  followed  by  your  initials  and  the  word  "Stock,"  as  the  title  "Burton,  H.  B.,  Stock," 
appears  in  the  index  form  given,  and  a  figure  (1)  to  show  on  which  page  of  the  Ledger  your  account 
is  found.      Be  sure  to  get  your  name  in  the  proper  column. 

124.  In  the  column  for  all  accounts  beginning  with  the  letter  "C"  write  the  word  "Cash"  and 
the  Ledger  page  on  which  the  account  is  found. 

125.  In  the  column  for  all  accounts  beginning  with  "E"  write  the  word  "Expense"  and  the 
number  of  the  ledger  page  on  which  the  Expense  account  is  found. 

126.  In  the  column  reserved  for  all  accounts  beginning  with  "  M  "  write  the  word  "  Merchandise  " 
and  the  ledger  page  on  which  the  Merchandise  account  is  found. 

127.  Hereafter,  in  opening  new  accounts  in  the  Ledger,  first  decide  on  what  page  the  account  is  to  be 
opened,  then  place  the  name  of  the  account  and  the  Ledger  page  in  the  proper  column  of  your  Index, 
after  which  you  should  write  the  title  of  the  account  on  the  proper  page.  This  order  should  always  be 
followed  so  as  to  avoid  opening  accounts  in  the  Ledger  and  not  having  them  properly  indexed. 


(left-hand  page.) 

(right-hand  page.) 

A 

Anderson,  J.  P.,                  14 

Burton,  H.  B.,  Stock, 

1 

Cash, 

2 

Dalton,  J., 

12 

Adams,  E.  B.,    108-93-54-18 

Bills  Payable, 

5 

s 

Alderson,W.G.,  75-€(M4-29 

c 
d 

128.  When  the  page  assigned  to  an  account  is  filled,  it  then  becomes  necessary  to  transfer  the 
account  to  another  page.  When  this  is  done,  you  write  the  new  page  number  before  the  last  page  number 
given  in  the  Index,  separating  the  numbers  with  a  dash  in  order  to  avoid  confusion.  See  the  page  numbers 
after  the  name  "  E.  B.  Adams  "  in  the  accompanying  form.  This  index  shows  that  E.  B.  Adams'  account 
was  first  entered  on  page  18,  but  afterwards  transferred  to  pages  54,  93,  and  108,  respectively.  The 
object  in  writing  the  numbers  of  the  pages  on  which  the  account  is  in  this  order,  is  so  that  the  last  page 
is  more  easily  noticed  when  looking  for  the  account  in  the  Index. 

129.  You  may  now  present  your  books  to  your  teacher  for  inspection.  When  they  are  approved, 
you  will  return  to  your  work  as  outlined  in  the  Business  Directions.  While  waiting  for  your  books  to  be 
examined  you  will  study  Part  Two  of  the  Guide,  unless  your  teacher  has  other  work  for  you  to  do. 


22 


JOBBING  BUSINESS 


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JOBBING  BUSINESS 


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The  above  merchandise  account  represents  the  postings  and  the  postmarks  if  the  Purchase, 
Cash,  Sales,  and  Journal  were  used;  the  abbreviations  P.,  C,  J.,  and  S.,  standing  respectively  for  Pur- 
chase, Cash,  Journal,  and  Sales.  It  also  shows  how  the  Mdse  Inventory  (if  any)  would  be  added  to 
the  credit  side  before  finding  the  difference  and  closing;  and  how  the  inventory  would  be  brought 
down,  below  the  closing  rulings,  on  the  opposite  side  after  closing. 

The  footings  at  the  bottom  of  page  26  and  at  top  of  this  page  show  how  footings  are  carried 
forward. 


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153.  Trial  Balance  by  Differences. — Rule.— LIn  addition  to  taking  totals  of  all  Ledger 
accounts,  take  the  differences  of  the  Ledger  accounts.  Set  opposite  each  account,  the  difference  be- 
tween the  two  sides.  Set  the  differences  that  fall  on  the  debit  side,  in  the  debit  column;  and  the 
differences  that  fall  on  the  credit  side,  in  the  credit  column.  If  your  work  is  correct,  these  differences 
will  balance. 

To  illustrate :  Suppose  the  debit  side  of  the  Cash  account  is  $5892.14,  and  the  credit  side  is  $2848.19, 
the  difference,  $3043.95,  would  fall  on  the  debit  side,  and  would  be  set  in  the  debit  column.  If  an 
account  had  a  debit  and  no  credit,  the  full  amount  of  the  debit  would  be  the  difference,  and  the  full 
amount  of  the  debit  would  be  set  in  the  debit  column.  Suppose  the  debit  of  John  Jones's  account 
is  $328.20,  and  the  credit  $518.40;  the  difference,  $190.20,  would  fall  on  the  credit  side,  and  would  be 
set  in  the  credit  column;  and  so  on  through  all  the  accounts  of  your  Trial  Balance. 


28  JOBBING    BUSINESS 

DIRECTIONS  FOR  SECOND  POSTING 

154.  In  the  previous  directions  for  transferring  the  various  amounts  of  the  entries  in  your  Journal  to 
the  Ledger,  you  were  instructed  to  post  all  of  the  debit  amounts  first,  after  which  you  would  post  all  of  the 
credit  amounts.  You  will,  therefore,  begin  this  posting  by  debiting  Merchandise  for  $243,  by  entering  this 
amount  on  the  first  line  below  the  $288  in  the  Merchandise  account,  ledger  page   4. 

155.  First,  enter  the  date  of  the  transaction  as  recorded  in  your  Journal.  Second,  enter  the  journal 
page  in  the  journal  folio  column  in  the  Ledger.  Third,  enter  the  amount  $243  in  the  money  column. 
See  Guide  page  26. 

156.  To  show  that  this  entry  is  posted  to  the  ledger  you  enter  the  number  of  the  ledger  page  4 
in  the  ledger  folio  column  of  your  Journal  opposite  the  word  ' '  Merchandise, ' '  as  you  were  instructed  to  do 
in  your  previous  posting. 

157.  Post  the  next  debit  amount,  $190,  to  the  debit  side  of  the  Cash  account  on  the  first  line  below 
the  balance,  $4939.30.  Enter  the  date  as  recorded  in  your  Journal,  the  journal  folio,  and  the  amount, 
after  which  you  enter  the  ledger  page  in  the  ledger  folio  column  of  your  Journal,  to  show  that  this  item 
has  been  transferred  to  its  account  in  the  Ledger. 

158.  Post  the  next  debit  amount,  $66.50,  to  the  debit  side  of  the  Cash  account. 

159.  Post  the  next  debit  amount,  $261,  to  the  debit  side  of  the  Merchandise  account. 

160.  Post  the  next  debit  amount,  $142.50,  to  the  debit  side  of  the  Cash  account. 

161.  Post  the  next  debit  amount,  $135.80,  to  the  debit  side  of  the  Cash  account. 

162.  Post  the  next  debit  amount,  $225,  to  the  debit  side  of  the  Merchandise  account 

163.  Post  the  next  debit  amount,  $126.10,  to  the  debit  side  of  the  Cash  account. 

164.  Post  the  next  debit  amount,  $114,  to  the  debit  side  of  the  Cash  account. 

165.  You  now  should  have  all  of  the  debit  items  posted,  and  the  postings  indicated  by  check-marks 
which  are  the  ledger  pages  on  which  the  accounts  are  found. 

166.  You  will  now  begin  to  post  the  credit  items  as  recorded  in  the  Journal  to  the  credit  side  of  their 
respective  accounts  in  the  Ledger,  as  follows  : 

167.  Post  the  first  credit' amount,  $243,  to  the  credit  side  of  the  Cash  account  on  the  next  line  below 
the  double  red  ink  ruling,  exactly  the  same  as  the  $243  is  entered  on  the  credit  side  of  the  Cash  account 
on  Guide  page  46 . 

168.  First,  enter  the  year  date  and  the  month  and  date  of  the  transaction  as  recorded  in  your 
Journal ;  then  the  journal  folio,  and  the  amount  in  the  money  column. 

169.  Place  the  proper  figure  in  the  proper  column  of  the  Journal  to  show  that  this  item  is  transferred 
to  the  Ledger.      Do  this  in  the  future  without  being  told. 

170.  Post  the  next  credit  amount,  $190,  to  the  credit  side  of  the  Merchandise  account. 

171.  Post  the  next  credit  amount,  $66.50,  to  the  credit  side  of  the  Merchandise  account. 

172.  Post  the  next  credit  amount,  $261,  to  the  credit  side  of  the  Cash  account. 

173.  Post  the  next  credit  amount,  $142.50,  to  the  credit  side  of  the  Merchandise  account. 

174.  Post  the  next  credit  amount,  $135.80,  to  the  credit  side  of  the  Merchandise  account. 

175.  Post  the  next  credit  amount,  $225,  to  the  credit  side  of  the  cash  account. 

176.  Post  the  next  credit  amount,  $126.10,  to  the  credit  side  of  the  Merchandise  account. 

177.  Post  the  next  credit  amount,  $114,  to  the  credit  side  of  the  Merchandise  account. 

178.  You  may  now  submit  your  Ledger  to  your  teacher  for  approval.  If  approved,  you  may  comply 
with  the  following  instructions: 

DIRECTIONS  FOR  TRIAL  BALANCE 

179.  Take  a  Trial  Balance,  proceeding  according  to  your  previous  instructions,  except  that 
in  adding  the  ledger  columns  you  will  not  include  any  amounts  above  the  double  red  ink  ruling,  that 
is,  inasmuch  as  your  Cash  account  has  been  balanced  and  the  balance  brought  down  below  the 
double  red  ink  ruling;  begin  this  Trial  Balance  with  the  items  below  the  double  red  ink  ruling,  but 
in  all  other  accounts  you  are  to  take  all  of  the  amounts  as  recorded  in  the  Ledger. 

180.  Be  sure  to  take  every  account  in  the  Ledger,  whether  you  have  posted  anything  to  that 


JOBBING   BUSINESS  29 

account  in  this  posting  or  not,  as  they  are  part  of  yQur  Ledger  just  as  much  as  those  amounts  which 
you  have  posted  since  you  took  your  last  Trial  Balance. 

181.  In  case  you  have  trouble  in  getting  this  Trial  Balance,  verify  each  ste^  of  your  work  as  follows: 

182.  First  look  over  the  additions  in  the  Ledger  and  then  look  over  the  amounts  as  recorded  in  the 
Trial  Balance  to  see  that  you  have  made  no  mistake  in  transferring  them  from  the  Ledger  to  the  Trial  Balance. 
Also  observe  that  each  amount  is  written  on  the  proper  side  of  the  Trial  Balance.  When  your  Trial 
Balance  proves,  submit  a  copy  of  it  to  your  teacher,  after  which  you  will  enter  it  in  your  Trial  Balance 
Book  as  in  previous  directions. 

183.  You  may  now  compare  your  Banking  ledger  and  Cash  account  as  previously  instructed.  If  they 
agree,  you  will  balance  your  Banking  ledger  and  Cash  account. 

184.  If  you  should  have  money  on  hand,  either  in  the  form  of  checks  or  currency,  your  Cash  Balance 
would  be  the  amount  of  money  on  deposit  in  the  bank,  plus  the  amount  of  money  on  hand,  and  the 
correctness  of  your  Cash  account  is  determined  by  ascertaining  the  difference  between  the  two  sides  of  the 
account,  which  should  be  the  same  as  the  Cash  Balance. 

185.  Be  sure  to  balance  your  Banking  ledger  first,  because  the  only  way  you  can  determine  your  Cash 
Balance  is  to  ascertain  the  amount  of  money  you  have  on  deposit. 

186.  If  you  have  complied  with  the  directions  your  money  is  all  on  deposit  at  the  bank.  Therefore, 
as  you  were  previously  told,  your  Bank  Balance  is  your  Cash  Balance. 

187.  Let  it  be  understood  that  your  Cash  Balance  is  not  determined  by  finding  the  difference  between 
the  two  sides  of  the  Cash  account,  but  is  determined  by  ascertaining  the  amount  of  money  which  you 
possess. 

188.  You  may  now  present  your  books  to  your  teacher,  and  when  they  are  approved,  you  will 
continue  your  work  as  outlined  in  the  Business  Directions. 

PROHISSORY   NOTES 

189.  A  Promissory  Note  is  an  unconditional  promise  in  writing,  signed  by  the  maker,  to  pay  at  a 
stated  time,  or  on  demand,  a  specified  sum  of  money,  with  or  without.interest,  to  some  particular  person,  or 
to  his  order,  or  to  bearer. 

190.  Parties  to  a  Note. — The  parties  to  a  note  are  divided  into  three  classes.    First,  the  Maker,  who 

is  the  person  who  signs  the  note,  that  is,  the  one  who  is  first  responsible  for  its  payment.  The  Payee  is  the 
person  in  whose  favor  the  note  is  drawn,  and  to  whom  it  is  originally  payable,  or  to  whom  it  may  be 
payable  when  the  note  is  legally  transferred.  These  parties,  the  maker  and  the  first  payee,  are  called  the 
original  parties  to  a  note,  while  persons  who  endorse  the  note  to  transfer  its  title  are  called  Endorsers  and 
are  also  known  as  Subsequent  Parties. 

191.  Use  of  Note  Stubs. — Many  note-books  are  printed  so  that  the  notes  may  be  torn  out  from  the 
book,  leaving  a  stub  for  the  purpose  of  keeping  a  record  of  the  notes.  This  is  not  always  done,  but  is  very 
good  business  custom.  When  using  a  note-book  with  a  stub  provided,  the  stub  should  always  be  filled 
out,  and  it  should  be  filled  out  before  writing  the  note,  for  the  same  reason  that  the  check-stub  should 
always  be  filled  out  before  writing  the  check. 

192.  How  to  Write  a  Note. — In  your  work  in  school  you  will  make  out  all  notes  in  accordance  with 
the  form  on  page  30,  as  a  careful  study  of  business  custom  shows  this  to  be  that  most  in  use.  If  a 
note  is  not  to  draw  interest  cancel  the  words  and  characters,  "  Interest  @  %,"  by  drawing  a  heavy 
line  through  them.  This  will  prevent  a  subsequent  holder  of  the  note  filling  in  an  interest  rate  and  com- 
pelling the  signer  of  the  note  to  pay  something  that  he  did  not  agree  to  pay. 

193.  You  should  carefully  read  the  chapter  in  your  Commercial  Law  book,  if  you  have  one,  relative 
to  Promissory  Notes. 

194.  The  place  of  payment  may  or  may  not  be  specified.  If  any  blank  space  in  a  note  or 
any  other  negotiable  paper  is  not  to  be  filled  out  it  should  be  cancelled  by  drawing  a  heavy  line  through  the 
blank  space  as  in  the  form  on  the  following  page. 


30 


JOBBING    BUSINESS 


195.  Time  to  Run. — In  the  course  of  ordinary  mercantile  business,  notes  are  usually  drawn  payable 
in  three  months,  four  months,  six  months,  at  the  expiration  of  one  year,  on  or  before  a  certain  date,  or  in 
whatever  time  is  agreed  upon  between  the  maker  and  the  payee  of  the  note. 

196.  In  order  to  afford  the  student  considerable  practise  in  the  use  of  notes,  in  this  course  it  has 
been  decided  to  arrange  for  the  notes  to  mature  at  short  periods,  say  from  one  to  thirty  days. 

197.  When  the  time  to  run  is  expressed  in  months  or  years,  the  due  date  is  always  determined  by 
compound  addition,  and  all  arithmetical  computations  to  ascertain  the  present  worth  or  interest  due  at 
maturity  are  figured  by  this  method  of  determining  the  time. 

198.  If  the  time  to  run  is  expressed  in  days,  the  due  date  is  determined  by  taking  the  actual  number 
of  days  after  the  date  expressed  in  the  note,  and  all  computations  concerning  the  note  are  based  on  the 
actual  number  of  days. 

199.  Maturity. — By  the  maturity  of  the  note  or  any  other  negotiable  paper  is  meant  the  time 
when  the  amount  is  due  and  collectable. 

200.  Days  of  Grace, — In  some  States  the  law  allows  the  maker  of  a  note  or  other  negotiable  paper 
three  days  longer  than  the  time  mentioned  in  the  paper,  in  which  to  pay  it.  These  three  days  are  known 
as  "  Days  of  Grace."  Inasmuch  as  days  of  grace  cause  confusion  and  oftentimes  loss  of  money,  many 
notes  are  written  without  grace,  that  is,  the  maker  and  the  payee  agree  that  the  time  for  payment  shall 
be  a  certain  specified  time  without  reference  to  days  of  grace.  This  agreement  is  expressed  in  different 
ways,  but  the  most  common  are  to  write  the  words,  "No  Grace,"  or  "Fixed,"  after  the  specified  time. 
No  days  of  grace  are  ever  allowed  on  checks. 

201.  If  days  of  grace  are  allowed  in  your  State,  you  must  add  three  days  to  the  time  mentioned 
in  your  notes  and  other  time  paper  in  order  to  ascertain  their  date  of  legal  maturity,  unless  otherwise 
agreed  at  the  time  of  writing  the  note.  Thus,  if  you  make  a  note  on  Jan.  15  payable  one  day  after  date, 
such  a  note,  in  case  days  of  grace  are  allowed,  would  mature  Jan.  19. 

202.  If  you  have  carefully  read  your  Law  Book  you  are  familiar  with  maturity  on  holidays.  If  you 
have  no  Law  Book  ask  your  teacher  to  explain  this  to  you. 

203.  The  following  is  a  general  form  of  a  Promissory  Note: 


No._^_ 


Date  ^AyJ^J-    /^  i  g0^_ 

For ^=£^^2?^  Y 


Indorsed  by 


2s_ 


Int.   at 
Due 


No._Z_ 


(y?z^y, 


^UO^L 


.after  date_^Z_proniise  to  pay  to  the  order  of 


~Z^2^Z^L^L^LyZ^S=Z2Lc^^ 


.$-2^^ 


V3^^^<^v4^  fo/ssr-r^    TV.TTARS 


payable  at 
Due-^^/~ 


.Interest  at; 


:per  cent.    Value  received. 


ff^ '?  ^r^f- 


'^y^&^L^^--^^/ 


204.  Bills  Payable  Account.— All  promissory  notes  or  other  written  obligations  issued  by  the 
proprietor  of  the  business  are  known  in  his  books  as  Bills  Payable.  Written  obligations  include  any 
written  promise  to  pay  on  the  part  of  the  proprietor.  An  account  is  kept  in  the  Ledger  with  Bills 
Payable.  This  account  is  credited  whenever  the  proprietor  issues  any  written  obligation  to  pay  and  is 
debited  whenever  those  obligations  are  paid,  either  in  part  or  in  whole. 

205.  The  interest  which  is  paid  out  or  received  by  a  business  house  is  kept  in  a  separate  account 
and  should  never  be  entered  or  in  any  way  connected  with  the  Bills  Payable  account. 


'g-O     R 


DATE  OF  NOTE 
OR  OF  ACCEPT- 
ING DRAFT. 

S 

o 

D 

£    ° 

>  3  5 

a  3 n 
5  5 » 

■      H    0 

;* 

M 

Jo 

3 
o 

1 

is1 

s 

z 

p 

5 

s 

11 

H    G 

C   H 

?  2 

H 

JAN. 

a 

d 
c 

M 

FEB. 

MAR. 

APRIL. 

MAY. 

JUNE. 

JULY. 

AUG. 

s 
s 

SEPT. 

OCT. 

NOV. 

DEC. 

s 

YEAR. 

t\> 

a 

o 
r 
r 

> 

C/5 

Ov 

Os 

s? 

>  2 

n  m 
z  0 
H    11 

s 

Ck.  No.  8 

When  you 
pay  this  note 
explain    how 
paid,  as   la 
the   notation 
shown    abo»e. 

>  i. 

p  z 

3   1 


£L  O 


2 


CL 


rt  wo     *— 


r/; 


CL 


w     pj 


3     O 


.^■O 


w 


3-    3 
rt>  Qrq 


ST*  rt- 


—      (J 


&  a 


32  JOBBING    BUSINESS 

DIRECTIONS   FOR  THIRD   POSTING 

212.  The  third  posting  involves  identically  the  same  class  of  work  that  has  been  done  heretofore. 
However,  you  should  give  close  attention  to  the  following  suggestions: 

213.  In  posting  to  an  account  that  has  been  ruled,  write  the  amount  to  be  posted  on  the  first  vacant 
line  below  the  ruling.  In  an  unruled  account  the  amount  to  be  posted  is  entered  on  the  next  line  below 
the  last  pen  written  amount. 

214.  You  should  open  an  account  in  the  Ledger  with  "Bills  Payable,"  and  with  each  person  to 
whom  you  have  sold  goods  on  account,  giving  each  new  account  one  page.  Be  sure  to  write  the 
name  of  the  account  in  the  Index  before  writing  the  name  at  the  top  of  the  ledger  page. 

215.  You  will  begin  this  posting  by  debiting  Merchandise  for  $266. 80.  Next  debit  Cash  for  $145.50. 
Next  debit  Cash  for  $140.  Next  debit  Merchandise  for  $216.  Continue  the  posting  of  all  the  debit 
amounts.  Be  sure  to  enter  the  ledger  page  in  the  ledger  folio  column  of  the  Journal,  to  show  that  these 
items  are  posted.  After  all  the  debit  items  of  the  Journal  are  posted  to  the  Ledger,  post  all  the  credit  items 
!o  credit  side  of  their  respective  accounts. 

216.  When  the  postings  have  been  completed,  proceed  to  find  the  footings  of  both  sides  of  each 
Ledger  account  as  previously  instructed  for  taking  a  Trial  Balance.  In  doing  this,  be  sure  not  to  include 
any  amounts  above  double  red  ink  rulings. 

211.  In  accounts  that  have  not  been  ruled,  be  sure  to  take  all  of  the  debit  items  and  all  of  the  credit 
items.  Be  careful  to  make  your  pencil  footings  in  small  light  figures  so  that  they  will  not  interfere  with 
further  work  in  the  Ledger. 

218.  You  may  now  take  a  Trial  Balance,  following  previous  instructions. 

219.  Now,  that  you  have  your  Trial  Balance,  you  may  close  the  Banking  Ledger,  after  which  you 
may  close  the  Cash  account  as  previously  instructed. 

220.  If  you  have  complied  with  the  directions  above,  you  may  present  your  books  to  your  teacher 
for  approval.  While  waiting  for  them  to  be  approved,  you  will  carefully  study  the  directions  for  making  a 
Balance  Sheet  of  this  business,  after  which  you  will  prepare  a  Balance  Sheet  according  to  the  instructions 
given. 

THE   BALANCE  SHEET 

221.  A  Balance  Sheet  is  a  specially  prepared  form  showing  a  Trial  Balance  of  the  Ledger,  followed 
by  a  statement  of  your  resources,  liabilities,  gains,  losses,  and  the  present  worth  of  the  firm. 

222.  The  Resources  of  a  firm  consist  of  all  property  belonging  to  the  firm,  such  as  Cash,  Merchan- 
dise, Real  Estate,  Bills  Receivable,  Furniture  and  Fixtures,  Chattels,  etc. ,  and  all  debts  owed  to  the  firm 
by  other  business  firms  or  persons. 

223.  Liabilities. — The  liabilities  of  a  firm  consist  of  all  debts  owed  by  the  firm,  such  as  Personal 
Accounts  Payable,  Bills  Payable,  Interest  due  and  unpaid,  Rent  due  and  unpaid,  and  everything  else  for 
which  the  firm  is  liable  for  payment. 

224.  The  Present  Worth  of  the  firm,  or  the  Net  Capital,  is  the  total  resources  of  the  business  less 
the  liabilities.  If  the  liabilities  of  the  firm  should  be  larger  than  the  total  resources,  a  firm  is  said  to 
be  insolvent,  or  to  be  unable  to  pay  its  debts  in  full. 

225.  At  the  present  time  you  have  no  liabilities,  therefore,  your  present  worth  is  the  total  of  your 
resources. 

226.  Gains. — The  gains  of  a  business  are  the  profits  derived  from  all  sources,  such  as  merchandise, 
the  sale  of  real  estate,  interest  and  discount  paid  or  allowed  to  the  firm,  and  anything  else  that  shows  a 
profit  in  handling. 

227.  At  the  present  time  your  only  gain  is  that  shown  by  the  Merchandise  account. 

228.  Losses. — The  losses  of  a  business  consist  o!  those  amounts  paid  out  for  running  expenses, 
which  are  usually  charged  to  the  Expense  account.  All  amounts  paid  out  for  interest  and  discount,  etc. , 
are  also  losses.  They  are  charged,  however,  in  bookkeeping  work  to  their  respective  accounts.  Any 
property  account,  such  as  Merchandise,  Real  Estate,  etc. ,  would  also  show  a  loss,  it  the  cost  of  the  article, 
purchased  was  more  than  the  selling  price. 

229.  Net  Gain. — If  the  total  gains  ot  the  business  are  greater  than  the  total  losses,  the  excess 
is  called  the  Net  Gain. 


JOBBING  BUSINESS  33 

230.  Net  Loss — If  the  total  losses  of  a  business  are  greater  than  the  total  gains,  the  difference 
between  the  accounts  is  called  the  Net  Loss. 

231.  Net  Capital. — If  the  total  resources  of  a  business  are  greater  than  the  total  liabilities,  the 
difference  between  the  resources  and  the  liabilities  is  called  the  Net  Capital  or  Present  Worth. 

232.  Proof  of  the  Balance  Sheet. — A  proof  of  the  Balance  Sheet  is  obtained  by  finding  the  net 
gain  or  net  loss  of  the  business.  If  the  business  is  conducted  at  a  profit,  the  net  gain  is  added  to  the 
investment  at  the  beginning  of  the  business,  or  at  the  time  of  taking  the  last  Balance  Sheet,  which  should 
equal  the  present  worth  of  the  firm  as  shown  by  the  difference  between  the  resources  and  liabilities  at  the 
time  of  closing  the  books. 

233.  If  the  business  has  been  conducted  at  a  loss,  the  net  loss  is  subtracted  from  the  amount  of  the 
investment  at  the  beginning  of  the  business,  or  at  the  time  of  taking  the  last  Balance  Sheet,  and  should 
equal  the  present  worth  of  the  business  as  shown  by  the  difference  between  the  resources  and  liabilities. 

234.  Preparing  a  Balance  Sheet — A  Balance  Sheet  usually  includes: 

1.  A  Trial  Balance  of  the  Ledger,  showing  the  total  debits  and  the  total  credits  of  the  respective 
accounts,  and  from  uhich  the  main  portion  of  the  Balance  Sheet  is  derived. 

2.  A  statement  of  all  the  resources. 

3.  A  statement  of  all  the  liabilities. 

4.  The  firm's   present   worth,  as   shown   by  the  difference  between  the   resources   and  liabilities. 

5.  An  itemized  list  of  all  the  accounts  showing  a  gain;  from  which  the  total  gain  of  the  business 
is  obtained. 

6.  An  itemized  list  of  the  accounts  showing  losses,  from  which  the  total  loss  is  obtained. 

7.  The  net  gain  or  the  net  loss.  If  the  business  was  conducted  at  a  loss,  the  losses  would  be 
listed  in  the  Balance  Sheet  before  the  gains,  so  as  to  make  it  more  convenient  to  subtract  one  amount  from 
the  other. 

8.  The  present  worth  of  the  firm  at  the  beginning  of  the  business,  or  the  time  of  taking  the  last 
Balance  Sheet,  plus  the  gain  or  minus  the  loss,  which  would  equal  the  present  worth  as  shown  by  the 
difference  between  the  resources  and  the  liabilities. 

235.  The  Balance  Sheet  on  the  following  page  illustrates  the  form  required  at  the  present  time. 
You  will  note  that  the  first  portion  of  this  Balance  Sheet  shows  a  Trial  Balance  in  the  usual  form.  Follow- 
ing this  Trial  Balance  is  a  list  of  the  resources  of  H.  B.  Burton,  which  in  this  case  are,  Cash,  U.  S.  Com- 
mission Co.  and  American  Merchandise  Co.  The  total  sum  of  these  resources  is  $5,092.70,  as  you  will 
see  by  studying  the  form. 

236.  Note  that  the  total  resources  are  brought  down  in  red  ink  as  the  total  present  worth  of  the 
proprietor,  there  being  no  liabilities  to  deduct. 

237.  Below  the  resources  is  an  exhibit  of  the  Merchandise  account,  showing  the  total  cost  of  the 
merchandise  and  the  total  selling  price  of  the  merchandise  ;  the  cost  of  the  merchandise  being  shown  by 
the  debit  side  of  the  Merchandise  account,  and  the  selling  price  of  the  merchandise  being  shown  by  the 
credit  side  of  the  Merchandise  account,  as  the  Merchandise  account  is  debited  for  all  purchases  and  credited 
for  all  sales. 

238.  The  difference  between  the  selling  price,  $3,189.40,  and  the  cost,  $2,996.70,  shows  the  total 
gain  for  Mr.  Burton's  business  to  be  $192.70. 

239.  An  exhibit  of  the  losses  of  the  business  as  shown  by  the  Expense  account  is  next  given,  and 
found  to  be  $100.  This  loss  is  then  subtracted  from  the  total  gain,  1192.70,  which  leaves  Mr.  Burton's  net 
gain  $92. 70,  which  amount  is  brought  down  in  red  ink  as  the  net  gain  of  the  Business.  This  net  gain  is 
then  added  to  Mr.  Burton's  Stock  account,  $5,000,  which  shows  the  proprietor's  present  worth  to  be 
$5,092.70.  This  amount  agrees  with  the  total  sum  of  Mr.  Burton's  resources,  which  proves,  so  far  as 
possible,  the  correctness  of  the  Balance  Sheet. 

240.  The  figures  at  the  left  of  this  Balance  Sheet  show  the  pages  in  the  Ledger  on  which  the  various 
accounts  may  be  found. 

241.  You  may  now  turn  to  the  back  of  the  Guide  and  carefully  read  Chapter  1,  Part  II,  after  which 
you  may  prepare  a  Balance  Sheet  for  your  business  on  a  sheet  of  journal  paper,  in  accordance  with  the 
form  given  on  the  following  page. 

When  this  Balance  Sheet  is  completed,  submit  a  copy  of  it  to  your  teacher  for  inspection,  and 
when  approved,  you  will  copy.it  neatly  on  the  second  page  of  your  Trial  Balance  Book,  beginning  at 
the  top  of  the  page. 


34 


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JOBBING  BUSINESS  35 

METHODS  OF  CLOSINQ  LEDGER  ACCOUNTS 

242.  Some  firms  require  closing  entries  to  be  made  directly  from  one  side  of  an  account  in  the 
Ledger  to  the  other,  or  from  one  account  to  another,  without  journal  entries.  In  such  cases,  red  ink 
is  used  when  a  resource  or  a  loss  is  forced  on  the  right-hand  side  or  when  a  liability  or  a  gain  is 
forced  on  the  left-hand  side.  This  is  called  "Closing  Direct."  Other  firms  require  all  closing  entries 
to  be  journalized  and  posted  to  the  Ledger.  In  most  cases  in  courtwork,  all  entries  in  the  Ledger 
are  required  to  appear  in  a  book  of  original  entry.  In  such  case  all  closing  entries  would  have  to  be 
journalized  and  posted,  and  no  red  ink  postings  would  appear  in  the  Ledger ;  all  closing  entries 
would  appear  in  black  ink. 

Still  a  few  other  firms  require  only  the  Loss  and  Gain  closing  entries  to  be  closed  through  the 
Journal. 

CLASSIFICATION  OF  ACCOUNTS  AND  CLOSINQ  "DIRECT" 

Before  starting  to  close  the  accounts  of  the  Ledger,  it  is  well  for  the  learner  to  understand  the 
classification  of  accounts,  as  the  different  classes  are  not  closed  in  the  same    way. 

Classes  of  Accounts.  On  the  basis  of  Assets  and  Debts,  Losses  and  Profits,  accounts  fall  into 
four  classes:  1.   Resources  (or  Assets);  2.  Liabilities  (or  Debts);  3.  Losses;  4.  Gains. 

A  Resource  is  anything  of  value  belonging  to  the  business.  A  Liability  is  any  obligation,  or 
debt,  the  business  owes.     A  Loss  is  an  expense  of  the  business.     A  Gain  is  a  profit  of  the  business. 

On  the  basis  of  Loss-producing  or  Gain-producing,  or  neither  Loss-  nor  Gain-producing,  and  of 
summations  to  show  the  final  result  of  the  business  and  to  prove  the  closing  of  the  Ledger,  accounts  fall 
into  three  classes.  These  classes  are  variously  named:  A.  Real  (or  Nonspeculative) ;  B.  Nominal 
(Representative  or  Speculative);     C.     Summary. 

Real  Accounts  (or  Nonspeculative)  are  those  accounts  that  are  not  expected  to  fluctuate  in 
value;  as,  Cash,  Bills  Receivable,  Bills  Payable,  and  personal  accounts;  and  whose  balance  shows  a 
resource  or  a  liability. 

To  Close  a  Real  Account  (or  Nonspeculative)  find  the  difference  between  the  two  sides  and  if 
the  difference  or  balance  falls  on  the  debit  side  it  is  a  resource,  since  by  (2)  (c)  par.  15,  "Resources" 
belong  on  the  left-hand  or  debit  side.  If  on  the  credit  side,  it  is  a  liability,  since  by  (3)  (c)  par.  15, 
"Liabilities"  belong  on  the  right-hand  or  credit  side.  Write  "Balance"  and  the  amount  of  the  balance 
on  the  smaller  side,  in  red  ink,  foot,  double  rule,  and  bring  down  the  balance  below  the  double  ruling  on 
the  opposite  side  from  the  red  ink,  and  in  black  ink. 

Nominal  Accounts  (Representative  or  Speculative)  are  those  accounts  that  are  expected  to 
fluctuate  in  value;  as,  merchandise,  real  estate,  interest,  bank  stock,  etc.;  or  they  are  accountsthat  grow 
out  of  the  necessary  outlay  to  carry  on  the  business;  as,  rent,  clerkhire,  etc.;  and  whose  balances 
show  a  loss  or  a  gain. 

To  Close  a  Nominal  Account  (Representative  or  Speculative)  first  determine  whether  the 
account  has  an  inventory;  that  is,  whether  there  is  anything  of  value  belonging  to  this  account  that  is 
not  shown  in  the  account,  and  whether  there  is  anything  due  on  this  account  that  is  not  shown  in  the 
account.  The  word  "inventory"  means  the  thing  discovered,  that  is,  it  is  not  shown  in  the  account  and 
therefore  has  to  be  found  by  search,  and  a  value  placed  thereon.  If  the  account  has  anything  of  value 
belonging  to  it  that  is  not  shown  in  the  account,  it  is  a  resource  inventory,  and  a  resource  inventory 
will  have  to  be  entered  on  the  credit  side  of  its  account,  in  red  ink.  If  there  is  anything  due  on  this 
account  that  is  not  shown  in  the  account  it  is  a  liability  inventory,  and  a  liability  inventory  will  have 
to  be  entered  on  the  debit  side  of  its  account,  in  red  ink;  because,  before  an  account  can  show  either 
loss  or  gain,  everything  of  value  belonging  to  it  will  have  to  be  sold  or  represented  as  sold  and  every  debt 
due  on  this  account  will  have  to  be  paid  or  represented  as  paid.  By  entering  the  resource  inventory 
on  the  credit  side,  in  red  ink,  the  resource  inventory  is  represented  as  sold ;  and  by  entering  the  liability 
inventory  on  the  debit  side,  in  red  ink,  the  liability  inventory,  or  debt,  is  represented  as  paid.  If  this 
is  not  clear  to  the  learner,  he  should  make  a  Journal  entry  on  journal  paper,  representing  that  the 
balance  of  Mdse  or  other  account,  has  been  sold  for  cash.  This  Journal  entry  would  be  Cash  to  Mdse. 
He  will  then  see  that  the  Mdse  item  would  be  post*  1  to  the  credit  of  the  Mdse  account ;  and  hence  to 
represent  the  resource  inventory  as  sold,  the  resource  inventory  (if  any)  will  have  to  be  entered  on 
the  credit  side  of  its  account,  in  red  ink.  If  there  is  anything  yet  due  on  the  account,  as  an  unpaid 
freight  bill,  let  him  make  the  Journal  entry  as  Mdse  to  Cash.  (Many  merchants  charge  in-freight 
directly  to  the  Mdse  account.  In  any  event  in-freight  is  closed  to  the  debit  of  Mdse  account.)  He 
will  then  see  that  the  Mdse  item  would  post  to  the  debit  side  of  Mdse  account,  and  hence,  to  represent 
a  liability  inventory,  as  paid  and  the  debt  discharged,  the  liability  inventory  will  have  to  be  entered 
on  the  debit  side  qf  its  account,  in  red  ink. 

Returned  Mdse  Account. — A  little  explanation  of  the  origin  of  this  account  will  make  the  clos- 
ing of  it  plain.  An  account  should  be  opened  with  Returned  Mdse,  and  when  you  return  merchandise 
you  should  debit  the  firm  the  merchandise  was  returned  to,  and  credit  Returned  Mdse.  When  mer- 
chandise is  returned  to  you,  you  should  debit  Returned  Mdse  and  credit  the  firm  returning  the  merchan- 
dise.     (In  case  of  many  "Returns"  it  is  well  to  keep  book  of  "Returns.") 

To  Close  Retd  Mdse  Account,  write,  in  red  ink,  "Mdse,"  with  its  folio,  and  the  debit  amount, 
on  the  credit  side;  then  write,  in  red  ink,  "Mdse,"  with  its  folio,  and  the  credit  amount,  on  the  debit 
side;  this  will  balance  the  account.  Then  carry  the  black  ink  debit  amount  of  Retd  Mdse  account  to 
the  credit  side  of  Mdse  account,  writing  "Retd  Mdse,"  with  its  folio,  and  the  amount,  in  red  ink.  Next, 
carry  the  black  ink  credit  amount  of  "Retd  Mdse"  account  to  the  debit  side  of  Mdse  account,  writing 
"Retd  Mdse,"  with  its  folio,  and  the  amount  in  red  ink.  Then  subtract  these  red  ink  entries  from  the 
totals  of  the  respective  sides  of  the  Mdse  account.  This  will  leave  the  net  purchases  and  the  net  sales 
of  Mdse.      Foot  and  double  rule  the  Retd  Mdse  account. 

The  Rule  for  Closing  Nominal  Accounts  may  be  stated  thus:  1.  When  the  balance  of  a  Nom- 
inal account  falls  on  the  debit  side,  after  adding  the  resource  inventory  (if  any)  to  the  credit  side, 
and  the  liability  inventory  (if  any)  to  the  debit  side,  the  difference  or  balance  is  a  loss;  since  by  (2) 
(c)  par  15,  "Losses"  belong  on  the  debit  side.  2.  When  the  balance  of  a  Nominal  account  falls  on  the 
credit  side,  after  adding  the  resource  inventory  (if  anv)  to  the  credit  side,  and  the  liability  inventory 
(if  any)  to  the  debit  side,  the  difference  or  balance  is  a  gain;  since  by   (3)    (c)  par.   15,  "Gains"  be- 


36  JOBBING  BUSINESS 

long  on  the  right-hand  or  credit  side.  The  account  is  then  closed  by  writing  Loss  and  Gain  on  the 
smaller  side,  in  red  ink,  footing  and  ruling  up,  and  bringing  down  the  resource  inventory  (if  any)  on 
the  left-hand,  or  resource  side,  in  black  ink,  and  the  liability  inventory  (if  any)  on  the  right-hand  or 
liability  side,  in  black  ink;  or  on  opposite  sides,  in  black  ink,  below  the  ruling.  The  "Loss  and  Gain" 
entry,  if  on  the  debit  side,  is  carried  to  the  opposite  (or  credit)  side  of  the  Loss  and  Gain  account,  in 
black  ink.  If  on  the  credit  side,  to  the  opposite  (or  debit)  side  of  the  Loss  and  Gain  account,  in  black 
ink. 

Summary  Accounts  are  accounts  that  show  a  summation  or  a  collection  of  the  results  of 
other  accounts,   such  as  the   Loss  and  Gain  account;  the  Balance  of  Balances  account,  etc. 

Closing  the  Summary  Account,  Loss  and  Gain,  depends  on  the  wishes  of  the  proprietor. 
If  he  desires  the  gain  or  the  loss  closed  into  his  Stock  account,  then  find  the  difference  between 
the  two  sides  and  write  "H.  B.  Burton,  Stock,"  and  the  amount,  on  the  smaller  side,  in  red  ink, 
and  foot  and  rule  the  account.  Then  carry  this 'red  ink  entry  to  ths  opposite  side  of  the  pro- 
prietor's account;  that  is,  if  a  gain,  the  red  ink  entry  would  fall  on  the  debit  side  of  the  Loss  and  Gain 
account  and  would  be  carried  to  the  credit  side  of  his  stock  account,  in  black  ink.  If  a  loss,  the 
red  ink  entry  would  fall  on  the  credit  side  of  the  Loss  and  Gain  account  and  would  be  carried  to  the 
debit  side  of  his  stock  account,  in  black  ink. 

If  the  proprietor  desires  his  gain  closed  into  Surplus  Fund  or  Surplus  account,  then  write  Surplus 
Fund  or  Surplus  and  the  amount  of  the  gain  on  the  smaller  side,  in  red  ink,  open  a  Surplus  account, 
and  carry  the  gain  to  the  credit  side  of  the  Surplus  account,  in  black  ink. 

If  the  proprietor  desires  the  gain  closed  one-half  into  a  Private  account,  and  the  other  half  into 
Surplus,  then  write  H.  B.  Burton,  Private,  and  give  this  account  half  the  gain,  in  red  ink;  and  then  write 
Surplus,  and  give  this  account  the  other  half,  in  red  ink.  Then  open  an  account  with  H.  B.  Burton, 
Private,  and  carry  half  the  gain  to  the  credit  of  this  account,  in  black  ink,  and  the  other  half  to  the 
credit  of  Surplus  account,  in  black  ink. 

If  the  business  should  show  a  loss,  the  proprietor  might  desire  to  let  the  loss  stand  on  the  debit 
side  of  the  Loss  and  Gain  account  as  "Balance"  in  black  ink,  below  the  ruling.  Or  he  might  decide 
to  have  it  carried  to  an  Impairment  account  or  fund,  or  some  other  name  that  would  not  divulge  at  once 
that  it  is  a  loss.  In  that  event,  write  Impairment  and  the  amount  of  the  loss  on  the  credit  side  of 
the  Loss  and  Gain  account,  in  red  ink;  then  open  an  Impairment  account  and  carry  the  loss  to  the  debit 
side  of  that  account,  in  black  ink. 

Proprietor's  Stock  Account  is  a  Real  account.  If  the  proprietor  decides  to  add  his  net 
gain  to  his  investment,  he,  in  effect,  makes  an  additional  investment  and  the  net  gain  then  becomes  a 
Real  account  and  is  merged  with  his  Stock  account.  If  a  loss,  and  the  proprietor  decides  to  close  it 
into  his  Stock  account  he  diminishes  his  Stock  account  by  the  amount  of  the  loss.  The  Proprietor's 
Stock  account  is  closed  with  Total  Investment  or  Total  Present  Worth  or  Balance  Present  Worth  or 
Net  Investment,  depending  on  whether  it  is  total,  balance  or  net,  by  writing  Total  P.  W.  etc.,  on  the 
debit  side,  in  red  ink;  and  after  footing  and  ruling,  bringing  down  the  Total  P.  W.  etc.,  on  the  opposite 
side  below  the  ruling,  and  in  black-  ink. 

Balance  of  Balances  Account  is  closed  by  carrying  all  balances  brought  down  on  the  left- 
hand  or  debit  side  of  accounts  to  the  left-hand  or  debit  side  of  the  Balance  of  Balances  account;  and 
all  balances  brought  down  on  the  right-hand  or  credit  side  of  accounts  to  the  credit  side  of  the  Balance 
of  Balances  account.  Since  by  (1)  par.  15,  the  debits  must  equal  the  credits,  the  two  sides  will  balance 
if  the  Ledger  is  closed  properly.     When  the  two  sides  balance,  foot  and  rule  the  account. 

Another  classification  of  accounts  often  met  with  is  Business,  Financial,  and  Summary. 

The  Business  accounts  are  Nominal,  Representative  or  Speculative  accounts;  as,  merchandise, 
real  estate,  bank  stock,  etc. 

The  Financial  accounts  are  accounts  that  represent  the  investment  of  all  kinds,  the  resources  of 
the  business,  and  the  liabilities  or  obligations  of  the  business;  as,  Cash,  Bills  Receivable,  Bills  Pay- 
able, Personal  Accounts,  due  to  us  or  from  us,  and  all  inventories,  both  resource  and  liability. 

The  Summary  accounts  were  defined  under  the  other  classifications. 

The  method  of  closing  these  accounts  has  already  been  described. 

REASONS  FOR  USINO  RED  INK 

The  red  ink  entry  as  used  in  the  foregoing  directions  for  closing  Ledger  accounts,  indicates  that 
no  actual  transaction  occurred,  no  corresponding  entry  having  been  made,  and  that  the  entry  (or  item) 
was  not  posted  from  any  book  of  original  entry.  It  is  made  a  Double  Entry,  however,  by  recording 
the  same  amount  in  black  ink  on  the  opposite  side  of  the  same  account  below  the  double  ruling,  or  is 
carried  to  the  opposite  side  of  some  other  account  to  which  it  is  transferred,  in  black  ink. 

It  is  not  a  mere  makeshift,  brought  in  for  the  purpose  of  showing  the  Ledger  accounts  in  balance, 
but  is  based  on  the  principles  of  the  science  of  Double  Entry  Bookkeeping  as  expressed  in  par.  15. 

According  to  (2)  (c)  par.  15,  "Resources  and  Losses"  are  debited,  that  is,  entered  on  the  left- 
hand  or  debit  side  in  black  ink,  and  by  (3)  (c)  par.  15,  "Liabilities  and  Gains"  are  credited,  that  is,  en- 
tered on  the  right-hand  or  credit  side  in  black  ink.  The  rule  for  the  proper  position,  then,  is  "Resources 
and  Losses"  on  the  left-hand  side,  in  black  ink;  "Liabilities  and  Gains"  on  the  right-hand  side,  in  black 
ink.  Then  if  a  Resource  or  a  Loss  is  forced  on  the  right-hand  side  for  the  purpose  of  making  the  two  sides 
of  an  account  balance,  foot  alike,  the  Resource  or  the  Loss  is  written  in  red  ink  to  show  that  it  is 
out  of  its  rightful  place  and  the  red  ink  stands  as  a  promise  to  carry  it  back  to  its  proper  side  of  the 
Ledger.  When  it  is  carried  back  to  its  proper  side  of  the  same  account,  it  is  written  below  the  closing 
lines  on  the  opposite  side  from  the  red  ink,  and  in  black  ink.  When  it  is  transferred  to  some  other 
account  it  is  entered  on  the  opposite  side  from  the  red  ink,  above  the  closing  ruling,  and  in  black  ink, 
because  it  is  then  on  its  proper  side. 

If  a  Liability  or  a  Gain  is  forced  on  the  left-hand  side  for  the  purpose  of  making  the  two  sides 
of  an  account  balance,  foot  alike,  the  Liability  or  the  Gain  is  written  in  red  ink,  to  show  that  it  is  out 
of  its  rightful  place,  and  the  red  ink  entry  stands  as  a  promise  to  carry  it  back  to  its  proper  side  of 
the  Ledger.  When  it  is  carried  back  to  its  proper  side  of  the  same  account,  it  is  entered  below  the 
closing  lines  on  the  opposite  side  from  the  red  ink,  and  in  black  ink.  When  it  is  transferred  to  some 
other  account,  it  is  entered  on  the  opposite  side  from  the  red  ink  above  the  closing  ruling,  and  in 
black  ink,  because  it  is  then  on  its  proper  side  of  the  Ledger. 


JOBBING  BUSINESS 


37 


CLOSING  BY  JOURNAL  ENTRIES 

In  case  all  closing  entries  are  required  to  be  journalized,  the  inventories  should  be  journalized 
first,  because  they  come  first  in  order  of  closing. 

1.  When  the  inventories  are  required  to  be  journalized,  each  account  having  an  inventory  is  debited 
and  credited  with  the  amount  of  its  inventory.  If  an  account  has  both  a  Resource  and  a  Liability 
inventory,  such  account  will  have  to  be  debited  and  credited  with  the  amount  of  its  Resource  inventory 
and  also  debited  and  credited  with  the  amount  of  its  Liability  inventory. 

These  Journal  entries  may.  be  made  in  a  compound  Journal  entry  of  Sundries  to  Sundries,  or 
each  entry  may  appear  separately. 

In  case  the  inventories  should  be  required  to  be  journalized,  the  compound  entry  would  be  as 
follows : 


Date 


ILLUSTRATIVE   ENTRIES 


L  P 


19 

Jan. 


Sundries  to  Sundries 

Mdse  Invry 

Mdse  Invry 

Int.  and  Dis.  (Res.)  Invry 

Int.  and  Dis.  (Res.)  Invry 

Int.  and  Dis.  (Lia.)  Invry 

Int.  and  Dis.  (Lia.)  Invry 

Chattels  Invry 

Chattels  Invry 

Fur.  and  Fix.  Invry '. j . 

Fur.  and  Fix.  Invry 


Explanation — Journal  entries  necessary  to  close  the  inventories 

for  the Trial  Balance.     Or  Journal  entries  necessary  to  show 

the  closing  of  the  inventories  at  the  end  of 19 ...  . 


4 

$1200 

4 

$1200 

5 

144 

65 

5 

144 

5 

104 

79 

5 

104 

8 

250 

8 

250 

9 

225 

9 

225 

65 
79 


The  word  "Sundries"  means  several,  and  "Sundries  to  Sundries,"  as  a  heading  or  title,  means  that 
there  are  more  than  one  debit  item  and  more  than  one  credit  item.  After  the  meaning  and  the  use  of 
"Sundries"  in  this  connection  are  thoroughly  understood  by  the  student,  such  heading  may  be  omitted 
if  the  teacher  prefers. 

In  case  of  journalized  resource  inventories,  the  credit  Journal  entries  are  posted  before  the  closing 
lines  are  ruled;  and  the  debit  entries  are  posted  below  the  closing  lines. 

In  case  of  journalized  liability  inventories,  the  debit  entries  are  posted  before  the  closing  lines 
are  ruled,  and  the  credits  after. 

When  required  to  journalize  the  Loss  and  Gain  entries: 

Accounts  showing  a  loss  are  credited,  and  Loss  and  Gain  debited  for  the  amount  of  the  loss. 
Accounts  showing  a  gain  are  debited,  and  Loss  and  Gain  credited  for  the  amount  of  the  gain. 
If  the  Loss  and  Gain  account  shows  a  gain,  the  Loss  and  Gain  account  is  debited,  and  the 
proprietor's  Stock  or  Private  account  (or  Reserve  Fund,  or  Undivided  Profits,  etc.,)  credited  for  the 
amount  of  the  gain.  (In  case  the  proprietor  has  a  Private  account,  the  Private  account  would  be  cred- 
ited.) 

(d)  If  the  Loss  and  Gain  account  shows  a  loss,  the  Loss  and  Gain  account  is  credited,  and  the 
proprietor's  Stock  account  or  Private  account  (or  Impairment  account,  etc.,)  is  debited.  (In  case 
of  incorporation  or  piyotal  account  or  other  business  in  which  it  is  not  desired  to  change  the  invest- 
ment or  capital  stock,  the  gain,  as  Reserve  Fund,  Undivided  Profits,  etc.,  or  the  loss,  as  Impairment 
Fund,  etc.,  .would  show  below  the  closing  lines.) 


2. 
(a) 
(b) 
(c) 


Date 


LP 


19 
Jan. 


Sundries  to  Sundries 

Loss  and  Gain 

Chattels 

Loss  and  Gain 

Fur.  and  Fix 

Loss  and  Gain 

Expense 

Loss  and  Gain 

Insurance 

Loss  and  Gain 

Real  Estate 

Loss  and  Gain 

Salary 

Loss  and  Gain , 

Books  and  Stationery . 
Loss  and  Gain 

Fuel 

Loss  and  Gain 

H.  B.  Burton,  Private 
Mdse 


Retd  Mdse. 

Retd  Mdse 

Mdse 


Explanation — Journal  entries  necessary  to  show  the  gain  for  the 

Trial  Balance.     Or  Journal  entries  necessary  to  close 

the  Speculative  accounts  for  the  month  of 19.  .  .  . 


19 

$251 

50 

8 

251 

19 

194 

87 

9 

194 

19 

40 

25 

9 

40 

19 

50 

18 

50 

19 

230 

21 

230 

19 

75 

23 

75 

19 

14 

24 

10 

14 

19 

52 

38 

28 

52 

19 

1505 

97 

1 

1505 

4 

160 

17 

160 

17 

95 

4 

•  95 

50 
87 
25 


24 
38 
97 


38 


JOBBING  BUSINESS 


Note — The  last  two  entries  transfer  Retd  Mdse  account  to  the  Mdse  account  in  order  that  the  credit 
amount  of  Retd  Mdse  account  may  be  subtracted  from  the  purchases,  and  the  debit  amount  from  the 
sales.     The  debij  amount  of  Retd  Mdse  account  is  $95  and  the  credit  amount  is  $100. 

To  make  Retd  Mdse  account  balance,  write  the  total  debit  amount  on  the  credit  side,  and  the  total 
credit  amount  on  the  debit  side;  foot  and  rule.  As  the  account  is  disposed  of  by  the  Journal  entries, 
writing  the  total  debit  amount  on  the  credit  side,  and  the  total  credit  amount  on  the  debit  side  does  not 
affect  the  equilibrium  of  the  Ledger  in  any  way  at  all;  but  it  makes  the  two  sides  foot  alike,  balance, 
that  the  account  may  be  ruled  up. 

3.  When  Nonspeculative  accounts  are  required  to  be  closed,  balanced,  by  Journal  entries,  and  the 
balances  brought  down  below  the  closing  lines,  each  account  is  debited  and  credited  with  the  difference 
between  the  two  sides.  The  amounts  that  are  to  show  above  the  closing  ruling  are  posted  before  the 
closing  lines  are  ruled,  and  the  amounts  to  show  below  the  closing  lines,  after. 


Date 


L  P 


19 
Jan. 


Sundries  to  Sundries 

H.  B.  Burton,  Stock,  Bal 

H.  B.  Burton,  Stock,  Bal 

Bills  Rec,  Bal 

Bills  Rec,  Bal 

A.  R.  Rice,  Bal 

A.  R.  Rice,  Bal 

A.  P.  Daggett,  Bal ...... 

A.  P.  Daggett,  Bal 

Robt.  .Taggart,  Bal 

Robt.  Taggart,  Bal 

G.  M.  Lyons,   Bal 

G.  M.  Lyons,  Bal 

T.  D.  Aker,  Bal 

T.  D.  Aker,  Bal 

C.  C.  Cooper,  Bal 

C.  C.  Cooper,  Bal 

College  Prod.  Co.,  Bal 

College  Prod.  Co.,   Bal 

W.  W.  Wier,  Bal 

W.  W.  Wier,  Bal 

Explanation — Journal    entries   necessary  to  close  the  Nonspecu- 
lative accounts  and  to  bring  down  the  balances ,  .  19.  .  .  . 


•" 

1 

$6057 

95 

1 

$6057 

5 

7445 

75 

5 

7445 

6 

462 

25 

6 

462 

6 

730 

40 

6 

730 

7 

675 

7 

675 

7 

756 

22 

7 

756 

8 

1280 

•8 

1280 

11 

775 

50 

11 

775 

11 

8747 

97 

11 

8747 

13 

905 

55 

13 

905 

95 
75 
25 
40 

22 

50 
97 
55 


4.  Journal  entries  may  be  used  to  transfer  accounts  from  an  old  Ledger  to  a  new  Ledger  or  from 
one  page  of  the  Ledger  to  another.  See  par.  285,  290. 

N.  B.  The  learner  must  not  forget  that  when  closing  entries  are  made  through  Journal  entries, 
no  red  ink  entry  appears  on  the  Ledger. 

5.  Some  firms  require  all  closing  entries  and  all  ruling  to  be  made  in  black  ink.  This  should 
be  avoided  by  students  because  of  the  difficulty  to  be  met  in  looking  up  errors. 

6.  For  illustrations  of  Direct  Closing,  see  par.  414.  For  illustrations  of  closing  by  Journal 
entries,  see  par.   250. 

It  is  well  for  the  learner  to  be  familiar  with  both  methods  of  closing  Ledger  accounts.  In  his 
schoolwork  he  is  to  follow  the  method  preferred  by  his  teacher.  In  his  work  as  bookkeeper,  he  is  to 
follow  the  method  preferred  by  his  employer. 

SUGGESTIONS  ON  RULING 

Bookkeepers  are  not  agreed  as  to  the  ruling  in  books  of  account,  but  is  it  well  for  the  student  to 
adopt  some  simple  and  consistent  ruling  and  to  follow  it.  He  will  thus  save  time  and  give  his  books  a 
uniform  appearance. 

It  is  believed  that  the  following  suggestive  rules  will  be  found  helpful : 

(a)  Single  rule  for  addition  or  subtraction. 

(b)  Double  rule  all  accounts  finally  disposed  of.  This  includes  accounts  that  are  in  balance, 
accounts  that  are  balanced,  the  final  footing  of  the  Journal  for  each  period  to  be  posted ;  the  total  amount 
posted  from  books  of  original  entry  such  as  the  Sales  Book,  Purchase  Book,  etc.  Also  totals  of 
Resources,   Liabilities,   Losses,  and  Gains,  in   Statements;  or  of  other  summaries. 

If  the  Balance  only  is  carried  forward,  write  "Fwd"  after  "Bal."  and  set  in  the  folio  column  the 
number  of  the  page  to  which  the  "Bal."  is  carried.  Single  rule  for  addition.  Double  rule  under  the 
footings,  but  do  not  bring  down  the  "Bal."  below  the  double  ruling.  On  the  page  to  which  the  "Bal." 
is  brought,  write  "Bal.  Brt  Fwd"  and  set  in  the  folio  column  the  number  of  the  page  from  which  the 
"Bal."  was  brought. 

If  the  debit  and  the  credit  footings  are  carried  forward,  write  "Fwd"  in  both  explanation  columns, 
and  set  in  both  folio  columns  the  number  of  the  page  to  which  the  footings  are  carried. 

Single  rule  for  addition,  but  do  not  put  any  ruling  under  the  footings. 

On  the  page  to  which  the  footings  are  brought,  write  in  both  explanation  columns,  "Brt  Fwd," 
and  set  in  both  folio  columns  the  number  of  the  page  from  which  the  footings  were  brought.  See  par. 
285,  290.  In  ruling  off  space  to  prevent  subsequent  posting  therein,  rule  from  the  last  folio  reference 
on  the  right  of  the  explanation  column,  obliquely  to  the  last  line  on  the  left  of  the  explanation  column 
above  the  footing.     The  student  is  to  follow  whatever  method  of  ruling  his  teacher  prefers. 


JOBBING   BUSINESS 


39 


CLOSING  THE  BOOKS 

243.  It  is  customary  at  stated  intervals  to  transfer  the  losses  and  gains  from  the  various  accounts  by 
which  they  are  represented  to  an  account  called  the  Loss  and  Gain  account.  Thi's  account  is  sometimes 
called  Profit  and  Loss,  but  as  the  title  ' '  Loss  and  Gain ' '  is  more  generally  accepted  you  will  use 
that  name. 

244.  After  the  various  losses  and  gains  of  the  business  are  grouped  into  this  Loss  and  Gain  account, 
the  Net  Gain  or  the  Net  Loss  is  transferred  to  the  proprietor's  Stock  account.  To  do  this,  special  entries 
in  the  Journal,  called  Closing  Entries,  will  be  used. 

245.  The  following  entries  are  those  required  at  the  present  time,  and  after  studying  them  over 
carefully  so  that  you  understand  them,  you  will  record  them  in  your  Journal  immediately  following 
the  last  entry. 

246.  The  entry,  Merchandise  to  Loss  and  Gain,  $192.70,  is  to  transfer  the  amount  of  gain  for  the 
Merchandise  account  to  the  Loss  and  Gain  account.  If  you  will  look  at  the  Merchandise  account  closely, 
you  will  notice  that  the  credit  side  of  the  account  is  $192.70  larger  than  the  debit  side,  which  is  the 
amount  you  have  gained  by  buying  and  selling  merchandise  since  you  began  your  business  in  school,  and 
after  debiting  merchandise  for  $192.70  the  account  will  be  in  balance,  and  may  then  be  ruled  and  gotten 
out  of  your  way  for  further  work.     Do  not  rule  the  account  until  you  are  instructed  to  do  so. 

24*7.  If  you  credit  the  Loss  and  Gain  account  for  $192.70  it  will  transfer  to  the  Loss  and  Gain 
account  the  amount  you  have  gained  by  your  merchandise  transactions,  and  will  in  no  way  affect  the 
balance  of  the  Ledger,  as  you  will  have  placed  an  equal  amount  on  the  debit  side  of  the  merchandise 
account. 

248.  The  next  entry,  Loss  and  Gain  to  Expense,  $100,  is  made  to  transfer  the  total  amount  of  your 
losses  on  expense  to  the  Loss  and  Gain  account,  and  puts  your  Expense  account  in  balance  so  that  you 
may  rule  it  and  get  it  out  of  the  way. 

249.  The  next  entry,  Loss  and  Gain  to  yourself,  Stock,  is  made  to  transfer  the  net  gain  of  the 
business  as  shown  by  your  Balance  Sheet,  and  also  by  the  Loss  and  Gain  account,  to  your  own  Stock 
account,  so  that  your  Stock  account  will  show  your  present  worth  at  the  time  of  closing  the  books. 
When  you  debit  Loss  and  Gain  for  the  net  gain  of  the  business,  $92.70,  it  will  make  the  Loss  and  Gain 
account  in  balance,  and  enable  you  to  rule  it  so  that  it  will  not  be  in  the  way  of  future  closings. 

DIRECTION 

250.  You  may  now  record  the  following  entries  in  your  Journal,  writing  your  own  name  in  place 
of  "H.  B.  Burton."  (If  the  teacher  prefers  to  use  "Direct  Closing,"  he  is  referred  to  par.  242,  414 
for  illustrations.) 


JO,     /f 


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40 


JOBBING  BUSINESS 


251.  Open  a  Loss  and  Gain  account  in  your  Ledger.  First  index  the  account  and  then  write 
the  words  "Loss  and  Gain"  on  the  light  blue  line  at  the  top  of  the  Ledger  page  7.  See  Loss  and  Gain 
account  below. 

252.  Post  the  amounts  of  the  closing  entries  to  their  respective  accounts  in  the  Ledger,  the 
same  as  you  posted  any  other  entries,  except  that  explanations  will  be  used  in  the  Ledger,  that  is, 
when  you  debit  Merchandise  write  the  words  "Loss  and  Gain"  in  the  explanation  column.  See  Mer- 
chandise account  on  page  26. 

253.  In  debiting  the  Loss  and  Gain  account  for  $100,  write  the  word  "Expense"  in  the  expla- 
nation column.     See  account  below. 

254.  Next  debit  Loss  and  Gain  for  $92.70,  and  write  your  own  name  in  the  explanation  column. 

255.  Next  credit  Loss  and  Gain  for  $192.70,  writing  the  word  "Merchandise"  in  the  explanation 
column. 

256.  Next  credit  Expense  for  $100,  writing  the  words  "Loss  and  Gain"  in  the  explanation 
column. 

257.  Next  credit  yourself  for  $92.70,  the  net  gain  of  the  business,  writing  the  words  "Loss 
and  Gain"  in  the  explanation  column,  as  the  words  "Loss  and  Gain"  are  written  in  the  explanation 
column  in  the  Ledger  account  illustrated  by  the  account  at  the  bottom  of  this  page. 


DIRECTION 

258.  Balance  your  own  stock  account  by  entering  the  current  date,  the  words  "  Present  Worth," 
and  the  amount,  $5,092.70,  on  the  debit  side  of  the  account  in  red  ink;  after  which  you  will  rule  the 
account  and  bring  the  Present  Worth  down  on  the  credit  side  in  black  ink,  as  illustrated  by  the 
following  form. 

259.  Next  rule  the  Expense  account,  as  illustrated  below. 

260.  Next  rule  the  Merchandise  account,  as  illustrated  by  the  Mdse  account,  Guide  page  26. 

261.  Next  rule  the  Loss  and  Gain  account,  as  illustrated  below. 


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JOBBING  BUSINESS 


41 


262.  Balance  of  Balances — The  Ledger  now  being  closed  you  may  prepare  a  Balance  of  Balances, 
which  is  a  Trial  Balance  taken  from  the  Ledger  immediately  after  closing  it  to  show  that  the  equality  ol 
the  two  sides  of  the  Ledger  has  been  maintained,  and  that  the  Ledger  has  not  been  thrown  out  of  balance 

by  the  closing  entries.     Many  carry  this  account  in  the  Ledger;  others,  in  the  Journal. 

263.  You  may  now  take  a  Balance  of  Balances  as  shown  by  the  accompanying  form. 


g\f3,fO 


264.  You  will  now  call  at  the  bank  for  your  Pass  Book  ;  after  which  read  the  following  observations 
regarding  this  book  : 

265.  Pass  Book. — The  purpose  of  this  book  is  to  show  the  amount  of  deposits  that  have  been 
made  and  the  number  and  amount  of  your  checks  that  have  been  presented  at  the  bank  and  paid  by  the 
banker,  at  the  time  the  book  is  written  up  or  balanced.  These  entries  in  your  Pass  Book  are  always  made 
by  the  banker,  and  you  have  no  right  to  put  any  figures  of  any  kind  in  this  book,  although  you,  are 
allowed  to  place  check  marks  (y/)  in  the  book  to  determine  whether  the  amount  as  entered  there  agrees 
with  the  amount  entered  in  your  Banking  Ledger. 

266.  If  all  of  the  checks  that  you  have  given  out  have  been  paid  by  your  banker,  the  balance  as 
shown  by  your  Pass  Book  should  exactly  agree  with  that  as  shown  by  your  Banking  Ledger.  If  any  of 
your  checks  have  not  yet  been  presented  to  the  bank,  the  Pass  Book  will  vary  from  your  Banking  Ledger 
by  exactly  the  amount  of  your  own  unpaid  checks.  The  accompanying  form  illustrates  your  Pass  Book 
as  it  will  appear  at  the  present  time,  provided  all  the  checks  which  you  have  issued  have  been 
received  at  the  bank  and  charged  to  your  account. 


Dr. 


Merchants'  Bank  in  account 


with  H.  B.  Burton. 


Cr. 


1909  j 

1909 

1909 

Sept. 

10 

Deposit 

5,000 

Sept. 

10 

100 

Sept. 

20 

1,594 

11 

<< 

804 

30 

11 

207 

13 

266 

80 

12 

« 

774 

90 

11 

270 

13 

216 

13 

M 

514 

10 

11 
12 
12 
12 

288 
243 
261 
225 

Bal. 

13 
13 
13 
13 
14 

263 
315 
189 
252 
3,996 

90 
60 

7.093 

30 

F'w'd 

1,594 

7,093 

30 

1909 
Sept. 

14 

Balance 

3,996 

60 

42 


JOBBING  BUSINESS 


COMPARING  THE  PASS  BOOK  AND  BANKING  LEDGER 

267.  You  may  now  compare  the  entries  in  the  Pass  Book  with  those  in 
your  Banking  Ledger,  in  order  to  see  that  they  correspond,  and  also  that  you 
may  know  which  of  your  checks,  if  any,  have  not  been  presented  at  the  bank. 

268.  Compare  these  two  books,  going  over  the  items  recorded  in  each, 
item  by  item,  placing  a  small  fed  ink  check  mark  after  the  items  as  recorded, 
so  that  you  can  compare  them  in  future  without  going  over  all  of  the  items 
recorded  in  each  book.  That  is,  first  compare  your  deposits,  note  the  item 
$5,000,  as  recorded  in  your  Banking  Ledger,  look  in  your  Pass  Book  to 
see  that  it  is  properly  recorded  there.  If  it  is,  place  a  small  red  ink  check 
mark  immediately  after  the  amount  in  the  Banking  Ledger,  and  also  the 
amount  in  the  Pass  Book. 

269.  Now  note  the  amount  $804. 30  as  recorded  in  your  Banking  Ledger, 
look  for  the  amount  in  your  Pass  Book,  and  if  found  .entered  there  correct, 
place  a  red  ink  check  mark  after  each  item. 

270.  Now  note  the  amount  $774.90  as  recorded  in  your  Banking 
Ledger,  and  if  found  properly  recorded  in  your  Pass  Book,  check  it. 

271.  Now  note  the  amount  $514.10  as  recorded  in  your  Banking 
Ledger,  and  if  found  correctly  entered  in  your  Pass  Book,  check  it. 

272.  As  you  have  now  checked  off  all  of  the  deposits  and  found  them 
to  agree,  you  will  proceed  to  check  the  amount  of  your  checks  drawn,  and 
paid  by  the  banker. 

273.  First  note  the  amount  of  check  No.  1,  $100.  Now  look  for  this 
amount  in  the  Pass  Book.  If  found  there,  place  a  red  ink  check  mark  after  it, 
and  so  on  with  each  item,  until  all  of  the  amounts  paid  by  your  banker  have 
been  checked  with  the  amounts  entered  in  your  Banking  Ledger.  Bear  in 
mind  that  if  you  have  drawn  any  checks  that  have  not  yet  been  presented  to 
the  banker,  the  difference  between  the  Pass  Book  Balance  and  the  Banking 
Ledger  Balance  should  be  exactly  the  amount  of  such  checks. 

274.  Special  Suggestions — If  you  desire  to  reach  a  fair  degree  of 
proficiency  in  your  work  and  to  finish  your  course  in  a  reasonable  length  of 
time,  you  must  study  at  home,  not  only  bookkeeping,  but  other  branches  as 
well. 

275.  Read  the  instructions  for  all  of  your  work  carefully,  by  first  reading 
the  entire  subject,  after  which  go  back  to  the  beginning  and  take  up  the  work 
according  to  the  outline  in  each  paragraph,  performing  the  work  for  each  step 
exactly  as  outlined. 

FILING  INVOICES 

276.  There  are  several  ways  of  filing  invoices.  Most  business  houses 
follow  one  or  the  other  of  two  ways:  One  way  is  to  use  an  Invoice  Register 
in  which  is  recorded  the  number  of  the  invoice,  the  File  Number,  if  filed  by 
number,  the  Payee,  Terms  of  Invoice,  as  %o;  %o;  etc.,  the  Date,  the  Amount, 
Due  Date,  the  Discount,  Cash  to  be  paid  and  Date  Paid,  and  any  other  infor- 
mation the  nature  of  the  business  may  require.  All  this  information  is  recorded 
on  the  Invoice  Register. 

277.  Then  the  invoice  is  filed  according  to  the  scheme  adopted  by  the 
house  for  filing  invoices,  in  vertical  files  or  otherwise. 

278.  The  other  way  is  to  paste  the  invoice  in  an  Invoice  or  Purchase 
Book  as  shown  on  page  43. 

279.  The  amount  of  the  invoice  is  extended  in  the  money  column  on  the 
right,  the  total  of  the  invoices  is  carried  forward  till  the  end  of  the  month  when 
the  total  is  posted  to  the  debit  of  the  merchandise  account,  just  as  the  total  of 
the  Sales  Book  is  posted  to  the  credit  of  the  merchandise  account. 


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JOBBING  BUSINESS 


43 


CHICAGO,  ILL. 


August  19,   1909. 


.  Burtoiv 

Bought  of  C.  H.  WHEELER 

GENERAL    JOBBER 


The  amount 
of  each  invoice  is 
posted  to  the  credit 
of  each  creditor's 
account,  just  as  the 
amount  of  each  sale 
is  posted  to  the 
debit  of  each  cus- 
tomer's account 
from  the  Sales  Book. 
If  several  Ledgers 
are  used,  the  total 
of  the  purchases  for 
each  month  is  post- 
ed to  the  General 
Ledger  as  directed 
under  Classification 
of  Ledgers.  If  the 
invoices  are  pasted 
in  the  book,  paste 
Invoice  No.  1  in 
first,  then  No.  2 
over  No.  1,  putting 
the  paste  on  the 
lower  edge  of  No.  2, 
allowing  No.  2  to 
extend  over  and 
cover  all  of  No.  1 
but  the  name.  Some 
paste  only  a  small 
part  of  the  lower 
left-hand  edge  to 
the  book  in  order 
that  an  invoice  may- 
be easily  taken  out 
if  necessary  to  pre- 
sent in  court;  or  for 
other  purpose.  No. 
3  over  No.  2,  and  so 
continuing  in  order. 
(Invoices  are  num- 
bered in  the  order 
of  their  receipt,  the 
first  received  is  No. 

1,  the  next  No.  2,  etc.)     Care  must  be  taken  to  have  the  necessary  information  on  each  invoice  exposed 
and  yet  to  use  the  space  of  the  Purchase  Book  economically. 

The  Invoice  Book  may  also  be  used  as  a  receptacle  for  the  invoices,  by  pasting  them  in  the  book  in 
order,  without  extending  the  amounts  into  the  money  column.  In  that  event  it  is  not  used  as  a  posting 
medium. 

280.  The  Invoice  Register  and  Tell  Tale  combined,  illustrated  on  page  42,  is  of  much  value 
in  houses  that  do  an  extensive  business.  The  Invoice  Register  shows  under  Accounts  Payable  the  pur- 
chases falling  due  for  a  given  period  as  one  week  or  ten  days  as  shown  by  an  abstract  of  the  Purchase 
Ledger  and  the  amount  of  discount  that  can  be  saved  if  the  payments  are  made  within  the  discount  period 
and  gives  the  names  of  the  creditors.  The  Tell  Tale  section  shows  under  Accounts  Receivable  the 
amounts  falling  due  during  the  same  period  of  time  as  shown  by  an  abstract  of  the  Sales  Ledger  and  gives 
the  names  of  the  debtors.  Such  an  abstract  of  the  Purchase  and  Sales  Ledgers  made  out  in  periods  of 
one  week  or  ten  days  or  two  weeks,  in  advance,  and  laid  on  the  manager' s  desk  will  be  of  great  value  to 
him  in  making  prompt  collections  and  meeting  obligations  and  saving  discounts  for  his  house. 


44 


.      JOBBING   BUSINESS 


281.  Daily  Deposits. — You  should  make  a  deposit  at,  or  about  the  close  of  each  day,  of  all  currency, 
checks,  and  other  bankable  commercial  paper.  Make  this  a  custom  and  never  fail  to  carry  it  out,  even 
though  you  fail  in  every  other  part  of  your  work.  You  should  do  this  because  it  is  a  custom  with  every 
careful,  shrewd  business  man  to  make  a  deposit  of  all  checks  and  other  bankable  commercial  papers  on  the 
very  day  of  their  receipt,  if  possible.  In  the  second  place,  it  is  absolutely  impossible  for  the  banker  to 
satisfactorily  balance  the  Pass  Book  of  other  depositors  when  you  are  holding  their  checks. 

282.  Overdrawing  Bank  Account. — You  should  never  write  a  check  unless  you  have  the  amount 
of  the  check  on  deposit  to  your  credit  at  the  bank,  unless  you  have  first  obtained  the  permission  of  the 
banker  to  do  so.  The  bank  is  under  no  obligation  to  pay  your  checks,  excepting  as  you  have  money 
there  for  that  purpose,  and  will  not  do  so.  If,  however,  you  should  make  a  mistake  and  inadvertently 
overdraw  your  bank  account,  report  the  fact  at  once  to  your  banker,  after  which  you  will  report  to  your 
teacher  who  will  advise  you  as  to  the  necessary  procedure. 

283.  Forwarding  Footings. — When  either  page  of  the  Banking  Ledger  is  filled  it  will  be  necessary 
to  forward  the  footings  of  both  pages,  as  shown  in  the  form  on  page  11.  Sometimes  all  records  for 
the  day  may  be  entered,  but  no  room  left  for  further  entries  of  another  day's  transactions.  At  such  time 
the  balance  on  deposit  only  would  be  carried  forward.  When  the  Bank  Balance  is  forwarded  to  a  new 
page  the  balance  should  not  be  brought  down  below  the  double  red  ink  ruling.    See  page  10. 

284.  Discount  Rates. — Except  by  special  agreement,  or  unless  specified  on  the  Merchandise  Card 
or  in  the  Business  Directions,  you  will  buy  and  sell  according  to  the  following  discounts: 

For  cash  or  for  papers  drawn  at  sight,  5  %  off. 

For  notes  or  other  time  papers,  4  %  off.  , 

On  account,  3  %  off. 

The  prices  printed  on  the  cards  will  be  followed  in  every  instance,  no  discount  being  allowed 
unless  specified  on  the  Merchandise  Cards,  or  in  the  Business  Directions.  Remember  that  under  no 
circumstances  whatever  are  you  allowed  to  alter  any  of  these  directions  or  any  of  the  prices  or  terms. 


FORM  OF  BILL  WITH  NO  DISCOUNT  ALLOWED 


Cincinnati,  Ohio,  June  22, 


.190 


9 


M. 


H.  B.  Burton 


Bought  of. 


W.  E.  Devine 


TERMS. 


dealer  in'  GENERAL.    MERCHANDISE 

Net   Cash 


NO. 


All  Claims  for  Shortage  or  IUhaoe  most  be)  made  on  Receipt  of  Goods 


20 
10 
15 
25 


brls.  Cornmeal 
« «   Oatmeal 

W.  F.  Flour 
« «    Super   « « 


3.60 
9.40 
5.50 
4.00 


72 

94 

82 

100 


50 


348 


50 


JOBBING  BUSINESS 


45 


In  the  preparation  of  these  red  ink  ruling  exercises  turn  the  beveled  edge  of  your  ruler  down; 
do  not  make  your  lines  too  heavy  and  carefullv  avoid  blots.  If  possible,  procure  and  keep  on  hand 
a  special  pen  for  red  ink. 





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285.  Transferring  Ledger  Account. — When  either  the  debit  or  credit  side  of  a  Ledger  ac- 
count has  filled  a  page  within  two  lines  of  the  bottom,  the  account  should  be  transferred  to  a  new 
page  by  ruling  it  up  and  transferring  the  debit  and  credit  footings.  Write  in  the  explanation  columns. 
"Fwd,"  and  in  the  folio  columns  the  page  to  which  you  transfer  the  account.  When  a  Ledger  ac- 
count is  transferred  to  a  new  page,  it  should  be  indicated  in  the  Ledger  Index  as  you  were  instructed 
on  Guide  page  21. 

286.  When  the  new  account  is  properly  indexed  in  the  Ledger,  the  footings  of  the  old  account 
should  be  brought  forward  as  shown  in  the  Cash  account  above. 

287.  Some  bookkeepers  in  transferring  an  account  to  a  new  page,  balance  the  account  and  carry 
the  balance  forward  instead  of  the  footings.  We  do  not  consider  it  advisable  to  do  this  for  the 
following  reasons: 

288.  First,  it  is  a  disadvantage  in  settling  long  standing  or  running  accounts.  Second,  it  is  much 
more  difficult  to  correct  an  error  when  an  account  has  been  balanced  than  when  it  has  not  been  balanced. 
Third,  if  it  is  desired  to  know  the  total  amount  of  the  debits  and  the  total  amount  of  the  credits  contained 
in  any  account,  it  cannot  be  readily  found  if  the  account  has  been  balanced  at  various  intervals. 

289.  For  the  above  reasons  you  should  never  close  any  account  unless  it  is  in  balance,  except  the 
Cash  account,  which  should  be  balanced  at  the  end  of  every  day's  business. 

290.  Transferring  Accounts  to  a  New  Ledger.  —When  accounts  are  transferred  to  a  new  Ledger, 
the  balance  only  should  "be  transferred.  In  this  case  the  process  is  identical  with  that  of  transferring  the 
account  from  one  page  to  another  in  the  Ledger,  except  that  the  letters  "N.  L."  (N.  L.  means  New 
Ledger)  are  written  in  the  explanation  column  of  the  old  Ledger,  and  the  ledger  folio  of  the  new  Ledger 
account  is  written  in  the  old  Ledger,  and  the  words,  "Balance  from  O.  L."  (O.  L.  means  old  Ledger),  and 
the  ledger  folio  of  the  old  Ledger  is  written  in  the  proper  column  of  the  new  Ledger. 

291.  Figures  and  Penmanship. — Good  figures  are  absolutely  indispensible  in  bookkeeping.  If 
one  would  be  a  successful  bookkeeper,  he  must  cultivate  high  proficiency  in  this  respect.  Good  penman- 
ship is  important,  but  good  figures  are  more  important.  Therefore,  be  especially  careful  in  this  part  of 
your  work. 

292.  Explanation  of  Entries. — Remember  that  every  Journal  Entry  should  be  accompanied  by  a 
brief  but  clear  explanation.  This  explanation  should  be  exceptionally  clear,  to  enable  anyone,  whether 
he  has  a  knowledge  of  bookkeeping  or  not,  to  understand  the  details  of  the  transaction.  No  work 
hereafter  will  be  accepted  unless  a  full  and  complete  explanation  is  written  after  each  and  every  Journal  entry. 


JOBBING  BUSINESS  49 

293.  Counter  Entries. — A  Counter  Entry  is  one  that  cancels  or  annuls  some  previous  entry  by 
reversing  it.  That  is,  if  you  had  previously  debited  M.  E.  Baker  and  credited  Merchandise  for  $10,  and 
afterwards  he  returned  the  goods,  the  Counter  Entry  would  be  as  follows: 

Mdse  (or  Retd  Mdse) $io 

M.  E.  Baker $io 

For  Mdse  Returned. 

294.  Cross  Entries. — A  Cross  Entry  is  one  that  adjusts  an  error  that  previously  was  made  in  some 
account.  That  is,  if  we  had  debited  J.  M.  Dunn  for  $10  which  should  have  been  charged  to  E.  P. 
Brown,  the  cross  entry  would  be: 

E.  P.  Brown $10. 

J.  M.  Dunn $10. 

To  correct  error  in  charging  J.  M.  Dunn  for  $10  that  should  have  been 
charged  to  E.  P.  B:own,  see  entry  No.   3,  Journal  page  21. 

295.  Adjusting  Entries. — An  Adjusting  Entry  is  one  made  for  the  purpose  of  correcting  an  error 
in  an  account,  or  to  settle  some  disputed  account  on  which  there  may  have  been  an  overcharge,  or  an 
insufficient  charge,  or  to  set  right  the  respective  debit  or  credit  entries  between  partners  or  other  business 
firms  up  to  the  present  or  to  some  other  specified  time.  Should  you  have  occasion  to  make  adjusting 
entries  in  your  books,  you  will  call  on  your  teacher  for  information  as  to  the  best  way  of  making 
such    entries. 

296.  How  to  Make  Corrections. — Remember  that  you  are  not  under  any  circumstances  to  make 
any  erasures  or  any  changes  of  any  kind  in  any  entry  without  first  consulting  your  teacher  as  to  the  best 
method  of  doing  the  same.  Incorrect  entries  should  never  be  erased,  but  by  writing  the  entire  entry  cor- 
rectly. A  wrong  entry  may  be  cancelled  by  writing  the  word  ' '  Void ' '  across  it  in  red  ink,  but  as  this 
disfigures  your  book  it  is  better  to  cross  out  the  entry,  that  is,  make  a  check-mark,  j/,  opposite  each 
item  of  the  debits  and  credits  of  the  entry  in  the  ledger  folio  column,  which  indicates  that  the  entry  is  not 
to  be  posted,  and  also  cross  out  the  figures  in  the  money  column,  thus:  Jg,  & 2fr\  H*^ 

297.  All  of  these  corrections  should  be  made  in  red  ink. 

298.  If  the  error  happens  to  be  in  one  amount  only,  this  amount  may  be  crossed  out,  and  the  correct 
amount  written  above  it,  thus:     jo  w:«>s?V)( 

299.  In  case  you  should  make  an  error  that  cannot  be  easily  corrected  under  these  suggestions  your 
teacher  will  advise  you  as  to  the  best  method  of  making  the  correction.  Much  depends  upon  the  peculiar 
circumstances  of  an  error  as  to  what  method  may  be  employed  to  the  best  advantage  in  correcting  it,  and 
you  will  acquire  by  experience  the  better  plan. 

300.  Deposits. — In  case  you  receive  currency,  deposit  it  at  the  bank,  and  never  use  it  in  buying 
goods  or  paying  bills  unless  you  are  instructed  to  do  so.  It  is  the  custom  of  large  business  houses  to  pay 
all  accounts  by  check.  One  object  in  doing  this  is  that  your  check  is  always  a  receipt  for  payment  of  the 
account  whe  l  returned  to  you,  and  paying  all  bills  by  check  avoids  much  trouble  in  keeping  your  Cash 
account  in  balance. 

301.  Bills  Receivable  Account. — All  notes  and  other  written  promises  to  pay  us,  which  would  oe 
included  among  the  resources  of  our  business,  are  known  as  Bills  Receivable. 

302.  An  axount  is  kept  in  the  Ledger  with  Bills  Receivable,  and  ti.is  account  is  debited  for  all 
written  obligations  to  pay  us  when  received,  and  credited  whenever  we  receive  money  for  Bills  Receivable 
either  wholly  or  in  part. 

303.  Inspection  of  the  Bill  Register. — You  should  carefully  examine  your  Bills  Receivable  and 
Bills  Payable  Register  each  morning  in  order  to  ascertain  if  any  of  your  own  notes,  or  notes  of  others  held 
by  you,  are  due.  A  successful  business  man  is  punctual  in  paying  his  own  obligations,  also  in  collecting 
the  obligations  of  others,  on  the  date  of  maturity.  Bear  in  mind  that  one  who  is  a  good  collector  is  more 
likely  to  succeed  in  business  than  a  poor  collector.  A  poor  salesman  who  can  collect  for  what  he  sells,  is 
much  more  likely  to  be  able  to  pay  his  bills,  than  is  a  good  salesman  who  is  a  poor  collector. 


50 


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^C6    ^;Q    ^Q    ^Q    ^Q 

i 

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s 

DATE  OF  NOTE 
OR  DRAFT. 

^ 

1 

JOBBING  BUSINESS 


51 


307  Maturity  of  Commercial  Papers. — If  a  note  were  given  May  1,  payable  in  thirty  days,  the 
first  thing  to  do  to  find  its  date  of  maturity  would  be  to  count  thirty  days  from  May  1,  which  would  make 
the  date  of  maturity  May  31,  or  if  three  days  of  grace  were  allowed,  June  3.  If  a  note  were  given  Feb.  10 
for  thirty  days,  the  first  thing  to  do  to  find  its  maturity  would  be  to  add  exactly  thirty  days  to  the  date  of 
the  note,  which  would  be  March  12,  as  there  are  only  twenty-eight  days  in  February,  unless  it  happened 
to  be  a  leap  year.  If  the  thirty  days  from  the  date  of  the  note  was  March  12,  then  add  three  days  of 
grace,  if  grace  were  allowed,  which  would  make  the  maturity  of  the  note  March  15.  If  the  year  in  which 
the  note  was  written  was  leap  year,  the  above  note  would  be  due  March  14  in  place  of  March  15. 

308.  If  a  note  were  given  Feb.  10,  payable  one  month  from  date,  it  would  be  due  March  10,  or  if 
three  days  of  grace  were  added,  March  13. 

309.  From  the  fact  that  notes  are  usually  written  a  certain  number  of  days,  or  so  many  months  after 
date,  great  care  should  be  taken  to  see  that  the  date  is  indicated  very  plainly  on  the  face  of  the  note.  This 
is  so  important  that  nearly  all  note-forms  are  provided  with  a  place  for  writing  the  date  of  maturity  as  well  as 
the  date  of  issue.  In  figuring  the  due  date  of  notes,  you  should  always  bear  in  mind  that  if  the  time 
to  run  is  expressed  in  days,  the  actual  number  of  days  should  be  counted  in  finding  the  date  of  maturity; 
while  if  the  time  to  run  is  expressed  in  months  or  years,  calendar  months  or  calendar  years  would  be 
counted. 

3 10.  Sometimes  a  note  is  written  with  no  time  of  payment  specified  in  the  note,  just  simply  a  promise 
to  pay.  Such  a  note  is  held  by  the  courts  to  be  due  at  once,  or  on  presentation  to  the  maker.  It  is  poor 
business  policy,  however,  for  anyone  to  accept  notes  or  other  commercial  papers  carelessly  written,  or 
over  which  any  dispute  may  arise  in  the  future. 

311.  In  all  of  your  work  in  school  you  will  count  the  days  or  months  in  determining  the  maturity  of 
your  commercial  papers,  exactly  the  same  as  you  would  in  a  real  business  office. 

312.  Part  Payment  of  a  Note. — When  any  payment  is  made  on  a  note,  if  the  payment  is  less  than 
the  amount  due,  including  the  interest,  the  holder  should  not  surrender  possession  of  the  note,  but  should 

endorse  the  payment  on  the  back  of  the  note  close  to  the  left  hand  end,  thus; 


~z<K^rx 


(/&*<?£$) 


313.  This  endorsement  should  be  made  in  the  presence  of  the  maker  of  the  note,  and  in  addition  to 
this  endorsement,  the  holder  of  the  note  should  give  a  receipt  to  the  maker  of  the  note  for  the  payment. 
In  making  the  endorsement  on  the  back  of  the  note,  the  holder  should  not  write  his  own  name,  because 
when  he  writes  his  name  on  the  back  of  the  note  he  makes  it  payable  to  bearer,  and,  if  he  should  lose  it, 
anyone  who  found  it  could  collect  same. 

314.  Sometimes  it  is  not  convenient  to  pay  the  entire  amount  of  the  note  due  at  maturity,  and  a 
mutual  agreement  is  made  whereby  the  holder  of  the  note  surrenders  it  to  the  maker  and  a  new  note  is 
issued  to  the  holder  of  the  old  note  for  the  amount  still  due.     This  is  called  Renewing  a  Note.  • 

315.  Modern  Forms  and  Methods. — The  forms  illustrated  in  this- book  are  forms  that  are  in 
use  in  many  of  the  business  houses  of  today,  and  the  methods  herein  presented  are  the  business  cus- 
toms in  many  of  the  best  and  most  progressive  concerns. 

316.  Inventory  Your  Knowledge  and  Skill.— It  is  an  excellent  plan  for  the  student  to 
take  an  inventory  of  his  understanding  of  the  principles  of  the  science  of  Double  Entry  Bookkeeping, 
and  his  improvement  in  skill  in  the  art,  frequently,  and  to  preserve  the  inventories  and  compare 
earlier  with  later  ones  to  note  progress.     Such  comparisons  will  lead  to  harder  work. 


52  JOBBING  BUSINESS 

BE  ORDERLY  AND  SYSTEMATIC 

317.  To  gain  the  best  results  in  your  work  it  is  essential  that  you  be  orderly  and  systematic  in 
all  things.  You  should  have  a  place  for  everything,  and  keep  everything  in  its  place.  You  should 
have  a  time  for  everything,  and  do  everything  in  the  proper  time. 

318.  A  prominent  business  educator  recently  said  before  his  class  of  students,  "He  who  can  do 
what  he  is  told,  as  he  is  told,  and  when  he  is  told,  has  made  great  strides  toward  completing  his  business 
education."  Through  all  of  your  work  neatness,  orderliness  and  accuracy  should  be  prominent  character- 
istics. These  are  unfailing  tests  of  the  careful  bookkeeper.  Do  not  under  any  circumstances  attempt  to 
write  with  your  arm  hanging  over  the  edge  of  the  desk.  Maintain  a  correct  position  with  both  feet  flat  on 
the  floor. 

319.  Books  that  you  are  not  using  should  be  carefully  arranged  on  your  desk,  and  you  should  not 
have  things  piled  promiscuously  at  any  time  or  for  any  reason.  Look  well  to  these  details,  and  you  will 
progress  so  rapidly  that  you  will  be  surprised. 

320.  Understand  your  work.  Should  anything  present  itself  that  you  do  not  clearly  understand, 
you  should  not  slur  over  it  and  let  it  go.  You  are  in  school  to  learn  to  do  the  things  that  you  do  not 
understand  how  to  do.  Consequently  you  should  seek  out  the  difficult  transactions.  Learn  to  do  the 
things  that  require  thought  and  concentrated  application,  and  you  will  find  that  the  things  which  appear 
difficult  are  in  reality  very  simple.  Read  every  paragraph  of  your  directions.  Reason  out  fully  what  you 
are  going  to  do  and  then  go  about  it.     Do  not  under  any  circumstances  ask  assistance  of  other  students. 

FRACTIONAL  PARTS  OF  A  CENT 

321.  When  an  extension  or  an  amount  involves  a  fractional  or  decimal  part  of  a  cent,  proceed  as 
follows: 

1.  If  the  resulting  fraction  or  decimal  is  less  than  one-half  of  a  cent,   disregard  it. 

2.  If  it  is  one-half  or  more,  consider  it  as  one  cent.     Note  the  following  bill  and  explanation. 


M. 


Cincinnati,    Ohio,    June   22, 


H.    B.    Burton 


.190. 


Bought  of. 


C.    C.   Cooper 


TERMS. 


dealer  in    GENERAL    MERCHANDISE 

On  Account 


NO. 


A  i.i.  Claims  for  Shortage:  or  Damage:  must   bed  ma.de:  on    Kkckiit  of   Goods 


1 

365 

lbs. 

Pork 

7  I/4c 

98 

96 

1 

269 

4  « 

Corned  Beef 

8  l/2c 

107 

87 

745 

t     < 

Lard 

11  3/4c 

87 

54 

294 

37 

Less  1% 

20 

61 

273 

76 

Explanation. — The  first  item,  1,303  lbs.  of  pork  at  1%  cents,  amounts  to  $98.96^;  disregarding  the 
%  of  a  cent,  the  extension  in  entered  $93.96. 

The  second  item,  1,269  lbs.  of  corned  beef  at  8)4  cents,  amounts  to  $107.86^2  ;  considering 
the  }4  cent  as  a  cent,  an  entry  of  $107.87  is  made 

The  third  item,  745  lbs.  of  lard  at  11^  cents,  amounts  to  $87.53^;  considering  the  ^  of  a 
cent  as  one  cent,  the  extension  is  $87. 54. 

The  sum  of  these  extensions  is  $294.37.  Seven  per  cent,  of  this  sum  is  $20.6059,  but  the 
discount  is  entered  as  $20.61.  Subtracting  the  discount  from  the  total  amount,  leaves  $273.76,  the  net 
amount  of  the  invoice. 


JOBBING  BUSINESS  53 

DAILY   REMINDER 

322.  This  is  a  very  convenient  office  device,  for  the  purpose  of  filing  memoranda  regarding  trans- 
actions that  are  to  be  carried  out  in  the  future,  and  also  for  filing  notes,  acceptances,  or  other  papers 
according  to  their  date  of  maturity.  It  consists  of  a  series  of  thirty-one  numbered  pockets,  or  compart- 
ments, corresponding  to  the  days  of  the  month.  If  a  given  transaction  is  to  be  performed  on  some  future 
date,  a  memorandum  is  written  on  a  small  piece  of  paper,  and  placed  in  the  compartment  that  corresponds 
to  that  day  of  the  month  upon  which  the  transaction  is  to  be  performed;  thus,  should  you  receive  a  note  for 
ten  days  on  the  third  of  the  month,  it  should  be  filed  in  compartment  No.  13,  unless  days  of  grace  are 
allowed,  in  which  case  it  would  be  put  No.  16.  If  a  paper  falls  due  on  some  date  in  the  next  month,  file  it 
in  the  same  manner;  thus,  if  on  the  26th  of  October  you  receive  a  paper  due  in  thirty  days,  file  it  in  com- 
partment  No.  25,  as  it  falls  due  on  November  25,  provided  days  of  grace  are  not  allowed.  By  filing  in 
this  manner  all  papers  relating  to  future  transactions,  the  dates  of  these  transactions  may  be  easily  kept 
in  mind,  as  each  morning  the  compartment  for  that  day  is  examined,  and  if  it  contains  any  matured  papers 
or  other  data  regarding  transactions  for  that  day,  these  are  to  be  attended  to  at  once.  If  there  are  any 
papers  in  the  compartment  for  the  previous  day,  which  for  any  cause  have  not  been  disposed  of,  these 
should  be  brought  forward  each  morning.  The  Daily  Reminder  should  also  be  used  to  remind  you  of  the 
maturity  of  your  own  obligations  which  mature  on  specified  dates;  thus,  if  you  buy  goods  at  ten  days  on 
the  17th  of  the  month,  the  memorandum  may  be  dropped  in  compartment  No.  27,  which  corresponds  to 
the  date  of  maturity.  This  will  enable  you  to  make  preparations  each  morning  for  paying  such  of  your 
obligations  as  mature  on  that  day. 

323.  Should  you  present  a  bill  or  a  note  for  payment,  and  the  debtor  be  absent,  the  paper  may  be 
placed  in  the  compartment  for  the  following  day,  in  order  that  it  may  again  be  presented. 

324.  The  value  of  the  Reminder  will  depend  on  the  accuracy  and  regularity  with  which  it  is  used. 
All  papers  that  require  to  be  referred  to  upon  any  given  date  in  the  future,  should  be  filed  in  the  proper 
compartment  as  soon  as  they  are  received,  and  the  student  should  make  a  habit  of  consulting  the  Reminder 
each  morning  before  taking  up  the  business  of  the  day. 

CONSTANT  ATTENTION 

325.  You  cannot  expect  nor  hope  to  become  proficient  in  your  work  unless  your  mind  is  carefully 
centered  on  what  you  are  doing  at  all  times.  You  must  be  thorough,  earnest  and  conscientious  in  all  your 
work,  and  in  doing  so  you  will  gain  a  reputation  for  being  a  responsible  and  entirely  trustworthy  young- 
person,  whom  your  instructors  will  be  glad  to  recommend  to  some  business  house  desiring  the  services  of 
additional  office  workers. 

THE  BEST  WAY  TO  MAKE   A  JOURNAL  ENTRY 

326.  If  you  have  a  complicated  transaction,  the  best  way  to  determine  the  proper  entry  is  first  to 
make  a  list  of  everything  you  received,  writing  the  respective  amounts  opposite  each  item;  then  make  a 
list  of  everything  you  parted  with,  writing  the  respective  amounts  opposite  the  items.  Add  the  items  of 
the  debit  and  then  add  the  items  of  the  credit  side.  If  the  debits  equal  the  credits,  submit  the  entry  to 
your  teacher  for  approval.     Study  par.   15. 

327.  You  should  learn  to  think  from  the  Journal  Entry  to  the  Ledger  Account,  which  will  be  affected 
by  the  transaction.  One  of  the  first  qualities  of  a  good  bookkeeper  is  the  ability  to  reason  from  the  trans- 
action to  the  Ledger  Account,  and  when  you  have  acquired  this  ability  you  will  have  little  difficulty  wiih 
your  further  bookkeeping  work. 

ITEMIZING  SALES  ON  ACCOUNT 

328.  When  merchandise  or  any  other  commodity  is  sold  on  account,  an  itemized  list  of  what  you 
sell  must  follow  the  Journal  entry.  It  is  a  good  plan  also  to  itemize  a  sale  for  which  you  receive  Bills 
Receivable  in  payment,  although  not  necessary.  Some  of  the  best  bookkeepers  itemize  all  sales  for  which 
they  do  not  receive  cash,  while  other  bookkeepers  itemize  only  such  sales  as  are  wholly  or  in  part  on 
account.  You  will  consult  your  teacher  as  to  his  wishes  in  this  matter,  as  it  is  optional  and  the  custom 
varies  in  different  localities. 


54  JOBBING    BUSINESS 

TESTING  THE  BILLS  PAY.  ACCOUNT 

329.  To  test  the  Bills  Pay.  Account  you  should  first  make  an  itemized  list  of  all  the  unpaid  Bills 
Pay.,  as  shown  by  your  Bills  Pay.  Reg.,  the  total  of  which  should  agree  with  the  difference  between 
the  two  sides  of  the  Bills  Pay.  Account  in  the  Ledger.  This  should  be  done  at  regular  intervals,  say 
every  evening  before  putting  away  your  books.  The  good  bookkeeper  keeps  his  books  in  balance  and 
correct  at  all  times,  and  is  therefore,  not  bothered  or  hindered  in  his  future  work  by  seeking  out  errors 
in  work  already  done. 

TESTING   BILLS  RECEIVABLE  ACCOUNT 

330.  To  test  the  Bills  Rec.  Account  you  should  first  make  an  itemized  list  of  the  Bills  Rec.  on 
hand  as  shown  by  the  Bills  Rec.  themselves;  second,  make  an  itemized  list  of  all  unpaid  Bills  Rec.  as 
shown  by  the  Bills  Rec.  Reg. ,  which  list  should  exactly  agree  with  the  list  prepared  from  the  vouchers 
themselves;  third,  ascertain  the  difference  between  the  two  sides  of  the  Bills  Rec.  Account  in  the  Ledger, 
ivhich  amount  should  equal  the  total  of  the  Bills  Rec.  on  hand  and  as  shown  by  the  Bills  Rec.   Reg. 

TESTING  THE  MERCHANDISE  ACCOUNT 

331.  It  is  not  a  difficult  matter  to  determine  if  you  have  posted  correctly  to  the  debit  side  of  the 
Merchandise  Account  for  the  day's  business,  and  the  usual  way  to  do  this  is  first  to  take  a  total  of  the 
merchandise  purchases  for  the  day,  as  shown  by  the  Invoices,  which  amount  should  agree  with  the  total 
amount  posted  to  the  debit  side  of  the  Merchandise  Account  for  the  current  date. 

332.  The  credit  side  is  easily  proved  by  making  an  itemized  list  of  all  merchandise  credits  from 
the  Books  of  Original  Entry  for  the  current  date,  the  total  of  which  should  agree  with  the  total  amount 
posted  to  the  credit  side  of  the  Merchandise  Account  under  the  same  date. 

CHECK  YOUR    POSTING 

333.  At  the  close  of  each  day's  business  after  your  Banking  Ledger' has  been  balanced  and  the 
Cash  Balance  entered  on  the  credit  side  of  the  Cash  Account,  the  account  ruled  up,  and  the  balance 
brought  down  below  the  ruling,  you  should  check  over  all  postings  of  the  day's  work  to  see  that  you  have 
made  no  mistake  in  transferring  the  items  from  the  Books  of  Original  Entry  to  the  General  Ledger.  If 
you  are  not  familiar  with  checking  postings,  the  following  explanation  should  be  read: 

334.  First  turn  to  your  Journal  for  the  business  of  the  current  day's  transactions.  Look  at  the 
first  debit  amount  and  then  turn  to  the  account  in  the  Ledger  and  see  that  the  amount  was  correctly 
posted.  If  the  amount  is  correctly  posted,  place  a  small  light  pencil  check-mark  in  the  Ledger,  and  also 
in  the  Journal  just  to  the  left  of  the  amount.  Follow  this  plan  until  you  have  gone  through  the  entire 
posting  for  the  day.  Many  prefer  to  turn  pencil  once  around,  pressing  firmly,  making  dot  instead  of 
checkmark. 

335.  The  object  of  testing  your  work  every  day  is  to  discover  an  error  early  while  the  bulk  of  the 
transactions  recorded  are  fresh  in  your  memory,  and  if  you  will  do  this  you  will  find  it  much  easier  to  keep 
your  books  in  balance  than  it  is  to  go  over  several  days  or  possibly  weeks'  work  trying  to  locate  a  refrac- 
tory figure. 

DAILY  TRIAL   BALANCES 

336.  Many  bookkeepers,  after  having  checked  over  all  their  postings,  go  through  the  Ledger  and 
ascertain  the  total  debits  and  the  total  credits  of  each  account  in  the  Ledger,  and  write  these  footings  in 
pencil  close  underneath  the  last  posting,  so  as  not  to  interfere  with  subsequent  postings.  ,In  adding  the 
totals  of  these  columns  it  is  not  necessary  to  include  the  amounts  above  a  pencil  footing  as  you  can  add 
the  pencil  footing  right  in  with  the  last  postings,  which,  of  course,  will  give  the  total  of  the  column.  This 
is  another  reason  for  leaving  the  footings  in  the  Ledger.  After  the  accounts  are  all  carefully  added,  take  a 
slip  of  ordinary  waste  paper  and  make  a  list  of  all  the  debits  in  one  column  and  all  the  credits  in  another 
column.  Ascertain  the  total  of  each  column,  and  if  the  totals  agree  it  is  reasonable  to  suppose  that  you 
have  made  no  error  in  your  posting.  It  is  not  necessary  to  make  a  permanent  record  of  these  daily  trial 
balances,  as  they  are  merely  taken  to  test  the  correctness  of  your  work.  Follow  the  above  instructions, 
and  the  student  who  does  not,  will  wonder  why  you  progress  so  much  more  rapidly  than  he  does. 

BALANCING  PASS  BOOK 

337.  You  should  have  your  Pass  Book  balanced  at  regular  intervals  as  it  will  assist  your  banker 
in  detecting  any  errors  which  may  arise  in  the  record  of  the  bank,  and  will  also  enable  you  to  check 
over  your  own  account  with  the  bank  more  readily  than  if  considerable  time  elapses  between  the  bal- 
ancing of  the  Pass  Book. 


JOBBING  BUSINESS  55 

338.  In  business  houses  it  is  customary  to  have  the  pass  book  balanced  at  least  once  a  month,  but 
it  would  be  much  better  if  the  pass  books  were  balanced  twice  a   month. 

339.  Mr.  Albert  R.  Barrett,  Certified  Public  Accountant,  in  his  excellent  text-book  on  Modern 
Banking  Methods,  says  as  follows: 

340.  "Through  the  individual  ledger  desk  many  frauds  and  defalcations  have  occurred,  generally 
through  collusion  with  others,  and  the  careful  proving  of  the  accounts  by  balancing  the  pass  book  is  one  of 
the  best  methods  of  preventing  or  discovering  the  same."  *  *  *  "Some  depositors  carelessly  leave  their 
pass  books  at  the  bank  continuously,  only  calling  for  them  every  three  or  six  months  when  they  desire 
them  balanced.  Needless  to  speak  disparagingly  of  this  practise.  No  well  managed  bank  would  allow 
such  a  thing.  I  know  of  one  instance  where  a  depositor  was  robbed  of  over  $4,000  by  a  teller  and  book- 
keeper in  collusion,  by  this  careless  practise." 

341.  During  your  course  in  school  you  should  leave  your  pass  book  at  the  bank  every  Friday,  and 
insist  on  having  it  returned  to  you  at  the  beginning  of  your  business  work  Monday,  at  which  time  you 
should  carefully  check  over  all  the  items  recorded  in  the  pass  book  with  the  items  as  recorded  in  your 
Banking  Ledger,  thus  verifying  the  balance  shown  by  your  pass  book.  This  will  save  you  much  confusion 
and  possibly  many  errors  in  your  work.      Read  paragraphs  267  to  275  inclusive. 

COriPLETE    EACH    DAY'S   WORK 

342.  The  good  office  worker  always  has  everything  cleaned  away  from  his  desk  before  going  home 
at  night.  Every  record  should  be  made  for  every  transaction  performed.  Every  incoming  paper  should 
be  carefully  filed  in  its  proper  place,  and  everything  pertaining  to  the  day's  work  should  be  completed  to 
the  minutest  detail  before  you  are  ready  to  leave  your  office  and  go  home. 

Hereafter  you  will  see  that  everything  is  done  connected  with  your  work,  that  your  posting  is  all  care- 
fully checked,  invoices  filed,  and  the  books  neatly  arranged  in  your  desk.  This  will  add  much  to  your 
progress  while  in  school,  and  prove  you  to  be  a  conscientious,  earnest  student,  whom  your  teachers  will  be 
glad  to  recommend  for  a  desirable  business  position. 

qOOD  FIGURES 

343.  Good  figures  are  indispensable  in  bookkeeping,  hence  every  one  who  would  be  a  successful 
bookkeeper  must  cultivate  high  proficiency  in  this  respect.  Remember  that  figures  are  the  most  important 
part  of  business  penmanship;  therefore,  take  special  care  that  you  make  your  figures  plain,  neat  and  accord- 
ing to  accepted  business  forms. 

DIRECTIONS  FOR  CLOSING  YOUR  BOOKS 

1.  See  that  all  items,  as  recorded  in  the  Journal,  are  correctly  posted  to  their  respective  Ledger 
Accounts. 

2.  Test  your  Bills  Pay.  and  Bills  Rec  Account.     See  paragraphs  329  and  330. 

3.  Test  your  Banking  Ledger  and  Cash  Accou.it,  and  if  correct,  rule  them  up,  bringing  the  bal- 
ance below  the  double  ink  ruling. 

4.  Sharpen  your  pencil  to  a  fine  point  and  add  all  Ledger  Accounts. 

5.  Take  a  Trial  Balance.     No  detailed  directions  should  be  necessary  for  this. 

6.  If  your  Trial  Balance  is  all  right,  rule  all  Ledger  Accounts  that  are  in  balance. 

7.  Prepare  a  Balance  Sheet  of  the  work  which  you  have  done,  according  to  the  general  form  as 
illustrated  on  page  59.  This  form  is  like  the  Balance  Sheet  which  you  previously  prepared  except  that 
■there  are  liabilities,  the  total  of  which  is  subtracted  from  the  resources  in  order  to  give  the  proprietor's 
present  worth,  and  the  Interest  Account  shows  a  loss. 

8.  Make  the  closing  entries  necessary  to  close  all  accounts  showing  loss  or  gain  to  the  Loss  and 
Gain  Account.  Make  these  entries  on  a  sheet  of  journal  paper  and  submit  them  to  your  teacher  for 
approval  before  recording  them  in  your  Journal.  When  approved,  record  them  in  your  Journal  and  post 
to  the  respective  accounts  in  the  Ledger.  Do  not  forget  to  put  in  the  explanations.  See  pages  35 
to  39. 

9.  Rule  the  Loss  and  Gain  Account,  Merchandise  Account  and  other  accounts  that  are  in  balance 
after  posting  the  closing  entries. 

10.  Close  your  own  stock  account  as  you  did  after  making  the  preceding  Balance  Sheet. 

11.  Take  a  Balance  of  Balances,  which  is  merely  a  Trial  Balance  of  your  Ledger,  to  see  that  you 
have  made  no  mistake  in  closing  same.      {Continued  on  next  page). 


56  '       JOBBING  BUSINESS 

12.  Get  your  Pass  Book  from  the  Bank  and  verify  its  entries. 

13.  Make  out  a  final  report  and  statement  of  your  business  in  the  Report  Book. 

14.  Prepare  your  books  for  inspection  by  the  teacher. 

15.  Present  your  books  to  your  teacher  for  inspection. 

16.  While  waiting  for  your  books  to  be  examined,  write  out  for  your   teacher's   inspection   the 
answers  to  all  questions  on  page  61. 

17.  If  you  have  all  of  the  questions  answered  you  will  present  the  work  to  your  teacher,  who  will 
return  your  books  with  the  necessary  corrections  marked. 

18.  When  you  have  obtained  your  teacher's  permission,  you  will  resume  the  business  directions 
in  the  Cabinet. 


SALES  BOOK 

344.  The  general  purpose  of  the  Sales  Book  is  to  keep  a  record  of  all  sales  of  merchandise  on 
account,  although  sales  for  cash,  drafts,  notes,  or  other  Bills  Rec,  etc.,  are  recorded  in  the  Sales  Book 
when  complete  record  is  desired.     Special  column  may  be  ruled  in  Sales  Book  for  sales  for  Cash. 

The  keeping  of  a  Sales  Book  effects  a  great  saving  in  the  labor  of  posting,  as  the  debit  amounts 
are  posted  direct  to  the  Ledger,  while  the  credit  amounts  are  carried  forward  to  the  end  of  the 
week  or  month,  and  then  posted  in  total  to  the  credit  side  of  the  Merchandise  Account. 

In  using  a  Sales  Book  the  merchandise  credit  is  the  total  amount  of  the  sales,  the  individual 
items  of  the  sales  being  entered  in  the  right  hand  column  of  the  Sales  Book,  as  you  will  see  by  the 
form  on  pages  57  and  58. 

When  an  entry  for  a  sale  is  made  in  the  Sales  Book,  the  entry  should  not  be  made  in  any  other 
book.  In  some  business  houses,  however,  the  plan  of  making  the  original  entry  in  the  Sales  Book 
and  then  transferring  it  to  the  Journal  before  posting  is  sometimes  used,  but  this  frustrates  the  object 
of  the  book  entirely  and  renders  it  practically  useless.  In  modern  accounting  the  object  is  to  make 
as  few  entries  as  possible  and  thus  accomplish  the  greatest  results  in  the  shortest  time.  This  being 
the  case,  you  will  bear  in  mind  that  one  entry  is  sufficient  for  any  transaction. 

Some  bookkeepers  enter  cash  sales  in  the  Sales  Book,  but  this  is  not  advisable  unless  you  have 
a  special  column  in  the  Sales  Book  for  that  purpose.  If  you  do  have  such  a  column,  as  you  will 
have  when  you  reach  one  of  the  business  offices  of  the  school,  the  cash  column  will  be  footed  and  the 
total  amount  transferred  to  the  Cash  Book  at  the  close  of  each  day's  business. 

When  a  Shipment  is  entered  in  the  Sales  Book,  the  name  and  address  of  the  consignee  should 
be  entered.  See  page  57.  Let  us  impress  upon  you  at  this  time  that  the  title,  "Shipment  No.  1  to 
U.  S.  Commission  Co.,  Battle  Creek,"  is  the  title  of  the  account  and  should  all  be  entered  in  the  Ledger. 
It  is  not  sufficient  to  write,  "U.  S.  Commission  Co."  any  more  than  it  would  be  sufficient  to  write  a  part 
of  the  title  of  any  other  account,  neither  would  "Ship  No.  1"  be  correct. 

Some  wholesale  merchants  itemize  all  cash  sales  as  well  as  sales  on  account,  for  the  reason  that 
the  wholesaler  frequently  receives  an  order  from  some  customer  asking  that  his  last  order  be  dupli- 
cated, which  possibly  might  have  been  a  cash  sale.  Having  itemized  the  sale,  the  wholesaler  is  able 
to  refer  to  it  immediately,  but  this  is  not  in  use  much  at  the  present  time  as  nearly  all  merchants 
keep  a  duplicate  copy  of  every  bill  rendered  in  some  form  or  another.  k 

When  sales  for  notes,  time  drafts  or  any  Bills  Rec.  are  entered  in  the  Sales  Book,  the  sale  may 
be  itemized.     Follow  your  teacher's  instructions  in  regard  to  this. 

The  student  should  understand  that  the  style  of  the  Sales  Book  and  the  method  of  using  it  depend 
entirely  upon  the  business  house,  as  many  large  business  houses  employ  from  ten  to  fifteen  entry  clerks, 
others  only  one  or  two.  In  some  business  offices  a  Sales  Book  is  not  used  at  all,  the  Journal  being 
prepared  with  an  extra  column  or  columns  to  be  used  in  place  of  the  regular  Sales  Book.  One  impor- 
tant point  that  should  not  be  overlooked  in  using  the  Sales  Book  is  that  in  making  all  entries  you 
should  give  the  terms  as  specified  on  the  bill,  the  customer's  address  in  full,  and  any  other  informa- 
tion that  may  be  of  use  at  some  future  time.  The  methods  that  you  will  use  during  the  work  in  the 
room  and  in  the  offices  for  recording  the  sales  of  merchandise  will  be  sufficient  to  give  you  a  thorough 
understanding  of  the  different  methods  employed  by  various  business  houses. 


SALES  BOOK 
flonday.  Nov.  18,  19 


1.     Sale  on  account   without 
discount. 


2.    Sale      on    account    with 
discount  allowed. 


3.  Shipment  of  goods  to  be 
sold  on  commission.  (Give 
address  of  consignee.) 


4.    Sale  for  note,  entry  not 
itemized. 


5.    Sale   for    note,  itemized 
tntry. 


6.  Sale  for  draft.  The  entry 
may  be  itemized  or  not,  as  in 
sales  for  note.    See  No.  5. 


7.  Sale  for  acceptance. 
The  entry  may  or  may  not  be 
itemized. 


8.  Sale  on  account  where 
part  payment  is  made,  buyer 
teing  credited  in  Cash  Book. 


9.  Sale  for  cash  where  buyer 
is  to  be  charged  for  goods  and 
credited  in  Cash  Book  for 
his  payments. 


10.  Sale  on  account  where 
a  discount  is  allowed  for  cash 
payment  within  a  speci- 
fied time.  The  buyer  is 
charged  with  the  whole  bill, 
and  is  then  credited  in  the 
Cash  Book  for  the  payment, 
and  in  the  Journal  for  the 
discount. 

11  Sale  on  account,  with 
discount  for  part  payment  for 
cash.  (Same  as  No.  10,  except 
that  part  payment  instead  of 
full  payment  is  made.)  See 
11  Discounts." 


12.  Cash  Sale  (itemized). 
This  form  of  Sales  Book  entry 
is  seldom  used,  and  only  in  a 
wholesale  business,  or  where 
goods  are  sold  by  an  agent,  or 
in  case  a  firm  receives  orders 
to  duplicate  some  previous 
order,  or  where  it  is  desirable 
to  know  the  amount  an.i  kind 
of  stock  on  hand  without  tak- 
ing an  inventory. 


98 


125 


80 


80 


80 


80 


72 


103 


98 


96 


c.  B. 

84 


58 


G.  E.  Daley 

10  brls.  B.  F.  Flour 
5       "      Ex.  Fish 
1       "      Mess  Pork 


A.  B.  Crook 

5  cds.  Oak  Wood 
3    "    Spruce  Wood 
10"     Redwood  Limbs 
Less  3  % 


Shipment  No.  1.     to  U.  S.  Com.  Co. 

Battle  Creek,  Mich. 
1  Coop,  2  doz.  P.  Rock  Chickens 
1       "       3     "     C.  B.  Ducks 
Less  10  % 


Bills  Receivable  Reg.  No.  14 

W.  S.  Woods  30  day  note,  Int.  6  % 


Bills  Receivable  Reg.  No.  15 

.  10  brls.  Ex.  Fam.  Flour 
10     "     Mess  Pork 


Bills  Receivable  J.  Small's  draft 

on  H.  Wells,  at  30  ds.,  our  favor,  Reg. 
No.  16 


Bills  Receivable  E.  M.  Tanner's 

acceptance  at  30  days  in  our  favor,  Reg. 
No.  17 


G.  W.  Potter 

5  brls.  B.  F.  Flour 
2     "      E.  M.     " 
5     "     Mess  Pork 

Less  4  % 
Cr.  by  Cash  $75,  C.  B.  42. 


7  50 

9  'M 


8  00 

7    50 

6  •"' 


45 
88U 


7  oo 
20  on 


6  «° 

7  50 

21  00 


Arthur  Welch,                               Cash  Sale 

4  brls.  Mess  Pork,  net 

20  00 

10     "     E.  F.  Flour,  " 

7    50 

5     "    XX  Pickles,  " 

18  00 

Paid  in  full,  C.  B.  104. 

A.  C.  Meckel,  319  Pine  St.,  City. 

20  cds.  Spruce  Wood  12  00 

18    "    Oak  Wood  15  00 

Less  10  % 

Cr.  by  Cash,  C.  B.  102,  $449.82,  less  2  %  for 
cash,  $9.18 

A.  C.  Meckel,  319  Pine  St.,  City. 

20  cds.  Spruce  Wood  12  00 

18    "    Oak  Wood  15  00 

Less  10%  51  00 

Cr.  by  Cash,  $150,  dis.  2  %,  $3,  C.  B.  102  153  00 


Cash  Sales.        Sold  to  E.  B.  Brown. 
1  S.  F.  Gang  Plow 
1  Dixon  Cultivator 
1  Wheel 


75 
46 
21 


40 

22 

65 

3 


10 

12 
2 


50 


50 

83 


80 


28 


70 

200 


33 

15 

105 

6 


80 
75 
90 


240 

270 

51 

459 


240 
270 


102 
11 
38 


12 


50 
50 
70 


142 


50 


123 


20 
75 


67 


52 


270 


146 


320 


146 


245 


459 


306 


Fwd 


2 

[57J 


407 


70 


27 


Tuesday,  June  19,  19 


13.  Sale  on  account,  with 
buyer's  address  given,  and 
discount  of  ten  per  cent  al- 
lowed on  sale.,  with  freight 
prepaid  and  buyer  charged 
with  the  same  in  Cash  Book 
only. 


14.  Same  as  No.  13,  except 
that  freight  is  charged  to 
buyer  in  Sales  Book,  and 
amount  included  in  the  sale. 
Merchandise  is  thus  credited 
for  cash  paid  out,  and  debited 
in  the  cash  Book  for  freight. 


15.  Sale  on  account;  giving 
specified  time  of  credit.  The 
/line  of  credit  is  entered  only 
when  it  is  a  different  time 
from  that  usually  allowed  to 
customers. 


10.  Sales  Book  entry  in 
■journal  entry  form  for  sale  of 
goods  belonging  to  consign- 
ment. The  amounts  to  be 
posted  are  placed  in  the  first 
column  only.  A  line  should  be 
left  above  the  entry  and  the 
items,  in  order  to  make  the 
entry  more  conspicuous  and 
to  distinguish  it  from  an  ordi- 
nary Sale  on  account. 

17.  Entrv  for  Sale  on  ac- 
count, where  various  other 
charges  are  includi  d  in  the 
sale.  rhis  entry  also  shows  a 
discount  of  ten  per  cent,  on 
the  sale,  exclusive  of  the 
charges. 


18.  Sale  on  account,  with 
special  discounts  for  each 
item. 

Note. — For  explanation  of 
fractions  and  figures  to  indi- 
cate discounts  see  "  Trade 
Discount  " 


19.  Sale  in  which  the 
weight  of  the  different  par- 
cels (in  this  case  barrels),  is 
given  separately.  This  entry 
also  shows  a  credit  of  $100  by 
note,  at  sixty  days.  ft  is 
entered  as  a  memorandum 
here,  and  the  buyer  is  given 
credit  in  the  Journal. 


20.  An  ordinary  entry  for 
Sale  on  account,  in  which  the 
buyer  has  been  given  a  credit 
for  merchandise  returned,  the 
amount  of  returned  merchan- 
dise being  subtracted  from  the 
purchase,  (he  buyer  being 
charged  with  the  balance. 


21.  Sale  on  account,  where 
freight  has  been  prepaid  by 
the  seller,  but  not  charged  to 
the  buyer. 


22.     Sale   on    account,    less 
10%  discount. 


57 


84 


Brt 

J.  B.  Kenney,        Stockton,  Cal. 
20  brls.  U.  Mills  Flour 
5     "     Pickles 
3    "     Corned  Beef 
Less  10  %, 
Adv.  P"rt 


Fvvd 


C.  B.  102 


93 


87 


93 


79 


J.  B.  Kenney,        Chicago,  111. 
20  brls.  U.  Mills  Flour 
5     "      Pickles 
3    "     Corned  Beef 
Less  10  %, 
Adv.  Frt. 


5  oo 

6  o:' 
9  00 


5  00 

6  00 
9  00 


5.30,  C.  B.  102 


92 


76 


96 


85 


10G 


Thomas  Coolidge,  on  acct.  30  ds. 

100  Note   Books  -2961- 

50  Draft       "       -1674- 

50  Receipt  "      -1245- 

25  Check     "      -1833- 


C.  W.  Irwin 

To  Consignment  No.  73 
10  cases  Eggs,  360  doz. 
5  sacks  D.  Prunes,  270  lbs. 
5      "      B.  B.  Potatoes,  545  lbs. 


G.  E.  Daley 

10  brls.  Rus.  Apples 
10  boxes  Soap,  450  lbs. 

5  bags  R.  Coffee,  840  lbs. 

Packing  and  Casing 

Drayage 

Adv.  Frt. 

Dis.  10  %  on  bill  $242.20 

A.  J.  Wiles 

10  doz.  2  lb.  Canned  Peas,  less  } 
5  chests  Y.  H.  Tea,  567  lbs.,  "  I 
10  boxes  Gra.  Crackers  "  20 

1  brl.  Lard,  250  lbs.  "  10 


J.  F.  Wyman 

10  brls.  B.  Sugar,  223,  219,  217,  231, 
216,  227,  129,  214,  216,  222,-2204 
5  brls.  Pork,         Less  10  % 
Cr.  by  note  60  ds.  $100,  J.  281 


P.  T.  Evans 

4  doz.  3-Q  Journals 
2  "  4  '•  Ledgers 
1     "      1  "    Bill  Books 

Cr.  by  Mdse.  returned 


A.  D.  Drew,        San  Bernardino,  Cal. 
10  brls.  C.  B.  Flour 

1  doz.  Brooms 

2  "     W.  Tubs 
5  brls.  Apples 


25 

231/2 

21  '" 

22 


181/7 
071/4 
01  % 


4  75 
12 
10% 


00 
00 


Frt.  prepaid  at  our  Exp.,  $21.90,  C.  B.  103 


0f.l/8 

13  *B 


68 
75 
22 


5   40 

45 

1    25 

3    C0 


Sam  Davis 

200  brls.  XXX  Flour 
100  "  Green  Apples 
100  "  Potatoes 
50'  "  Gr.  Sugar,  11,000  lbs. 
Less  10  % 


Mdse  Cr. 


5  « 

3  20 


100 
30 
27 
15 


100 
30 
27 
15 
18 


25 
11 
10 

5 


92 
92 
66 
19 
6 


47 

54 

140 

1 

21 
24 


30 

280 
20 

28 


135 

61 


32 
18 

.  2 
12 


54 
5 
30 
18 
21 


030 
32 

85 
660 
209 


39 


75 
50 
50 


99 
99 
60 
58 
81 


50 

70 
75 
75 
80 
22 


20 


13 


87 


64 


64 

80 


40 


90 


50 


407 


141 


27 


30 


159 


52 


60 


75 


242 


358 


28 


33 


190 


87 


40 


48 


io; 


40 


885 


591 


50 


[58] 


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60 


JOBBING   BUSINESS 
INVENTORIES,  NOV.  30,  19 


r 

rids^ 

10 

brls.  Fish 

10.00 

1 

0 

0 

3 

"     Pickles 

20.00 

6 

i) 

10 

"      Oatmeal 

8.00 

8 

0 

10 

"     Cornmeal 

6.00 

6 

0 

3 

0 

0 

Less  10£ 
Furniture  &  Fixtures 

3 

0 

2 

7 

0 

1 

Roll-top  Desk 

4 

0 

1 

Bookkeepers  Desk 

3 

0 

1 
1 

Safe 
Letter  File 

•_> 

5 
2 

0 

8 

1 

"       Press 
Office  Stationery  Estimated 

•v. 

1 
2 

6 

0 

3 

8 

4 

10$  Depreciation 
Chattels 

3 

8 

40 

3 

4 

5 

(50 

1 

Horse                                 1 

2 

5 

0 

1 

Wagon  $50.00                   Depreciation  10jg 
Shipments 

4 

5 

2 

9 

5 

No.  3    College  Produce  Co. 

4 

2 

1 

No.  4    U.  S.  Commission  Co. 

Expense 

3 

0 

0 

7 

2 

1 

Unexpired  Rent 

4 

0 

3 

Tons  Coal 

Interest  Receivable 

6.00 

1 

s 

■ 

5 

8 

Reg.  No.  3,     8  days  6£ 

1 

] 

26 

•'    5,    3  mos.  1% 

Interest  Payable 

3 

1 

60 

3 

2 

86 

■  Reg.  No.  9,     30  days  G% 

3 

42 

"  10,     15      "     6% 

4 

21 

"  16,     13      "     7% 

1 

1 

1 

46 

1 

9 

09 

EXAMINATION 

1.  What  is  a  jobber  or  wholesaler? 

2.  What  does  an  opening  entry  set  forth  and  where  should  it  be  written? 

3.  Explain  fully  how  a  banker  keeps  a  record  of  depositors'   signatures. 

4.  What  is  a  check? 

5.  How  many  parties  are  there  to  a  check? 

6.  When  should  your  checks  be  presented  at  the  bank? 

7.  Give  some  important  points  about  writing  checks,  and  explain  your  reasons. 

8.  Explain  what  is  meant  by  Filing  Papers,  and  when  should  they  be  filed? 

9.  What  is  the  difference  between  a  bill  and  an  invoice? 

10.  Explain  how  a  bill  or  an  invoice  should  be  made  out? 

11.  How  should  a  bill  be  receipted? 

12.  Give  the  three  principles  of  Double  Entry  Bookkeeping. 

13.  What  is  meant  by  journalizing  a  transaction? 

14.  What  is  the  best  proceeding  if  you  are  in  doubt  as  to  how  a  transaction  should  be  recorded? 

15.  How  does  a  depositor  withdraw  money  from  the  bank? 

16.  Where  should  the  endorsement  be  written  on  commercial  paper? 

17.  What  is  the  purpose  of  the  Banking  Ledger? 

18.  What  is  a  deposit  and  how  is  it  made? 

19.  On  a  sheet  of  blank  paper  rule  a  banking  ledger  form,  and  explain  in  full  its  use. 

20.  Do  the  footings  in  the  banking  ledger  always  agree  with  those  of  the  Cash  Account? 

21.  Explain  fully  what  is  meant  by  posting. 

22.  What  is  the  purpose  of  the  Folio  Column  in  the  Journal? 

23.  What  is  the  purpose  of  the  Folio  Column  in  the  Ledger? 

24.  For  what  is  the  Explanation  Column  in  the  Ledger  used? 

25.  When  is  an  account  in  balance? 

26.  What  should  be  done  with  an  account  when  it  is  in  balance? 

27.  How  do  you  transfer  an  account  from  one  page  of  the  Ledger  to  another,    and    when    should 

this  be  done? 

28.  If  the  debit  side  of  the  Cash  Account  is  the  larger  what  does  it  show? 

29.  Define  a  Promissory  Note. 

30.  How  many  parties  are  there  to  a  note? 

31.  How  do  you  determine  the  maturity  of  a  note? 

32.  Are  'days  of  grace' allowed  oi  checks? 

33.  How  should  you  dispose  of  a  note  that  you  have  paid? 

34.  Define  a  Trial  Balance. 

35.  Define  resources. 

36.  Define  liabilities. 

37.  Define  losses.. 

38.  Define  gains. 

39.  Define  proprietor  s  present  worth. 

40.  Write  a  detailed  explanation  as  to  how  you  would  go  .about  it  to  prepare  a  Balance  Sheet  ol 

your  business. 

41.  Define  net  gain. 

42.  What  is  meant  when  a  firm  is  said  to  be  insolvent? 

43.  How  do  you  determine  the  losses  or  gains  in  the  Merchandise  Account? 

44.  How  many  ways  are  there  to  determine  the  proprietor's  present  worth? 

45.  What  is  the  purpose  of  the  Invoice  Book? 

46.  For  what  should  red  ink  be  used  in  your  bookkeeping  work? 

47.  What  can  you  say  regarding  business  penmanship  and  figures? 

48.  What  can  you  say  of  the  importance  of  system  and  order  in  all  your  work? 

49.  What  should  be  done  every  night  before  leaving  the  room? 

50.  In  making  extensions    in  bills,   interest  computations,   etc.,   how  are  fractional  parts  of  a  cent 

disposed  of? 

51.  What  is  your  opinion  concerning  lead  pencil  figures,  check  marks,  etc.? 

52.  What  would  you  say  of  the  importance  of  accuracy   in  adding  and  other  business    calculations? 

53.  When  do  you  make  an  itemized  list  of  merchandise  or  other  commodities  sold  in  the  Journal 
Entries? 

When  the  above  examination  is  completed  hand  the  manuscript  to  your  teacher. 

161] 


62 


GENERAL   REVIEW 


QUESTIONS  AND  ANSWERS 

INTRODUCTORY 

1.  "What  is  a  business  transaction  f 

The  performance  of  some  act,  or  the  making  of 
some  agreement  relating  to  one's  business  or  financial 
affairs,  as  to  purchase,  sell  or  exchange  property,  to 
borrow  or  loaii  money,  etc. 

2.  What  is  the  general  purpose  of  bookkeeping  ? 
To  keep  a  plain  and  systematic  record  of  business 

transactions  and  of  the  profits  or  losses  that  result 
from  these  transactions. 

3.  Mention  some  things  that  are  necessary  in 
order  to  secure  neatness  in  the  keeping  of  a  set  of 
books. 

The  hands  should  be  kept  clean,  and  the  desk  and 
books  free  from  dust,  etc. ;  the  blotter  should  be 
employed  freely,  but  one  side  being  used  ;  books 
should  not  be  left  lying  about  open  when  they  are 
not  being  used,  and  care  should  be  exercised  in  the 
management  of  pen,  ink,  and  mucilage.  Should  any 
book  be  blotted  or  otherwise  soiled,  the  disfigure- 
ment should  at  once  be  removed.     See,  also,  page  1. 

Jf..  Name  som^  aids  to  order  and  accuracy. 

There  should  be  a  fixed  place  for  every  book, 
article  of  stationery,  or  desk  appliance,  and  it  should 
be  kept  in  this  place  except  when  in  actual  use. 
The  regular  course  of  procedure  required  in  the 
different  kin  Is  of  transactions  should  never  be  varied. 
Every  addition  or  other  arithmetical  computation, 
should  be  carefully  verified  before  making  any  rec- 
ord depending  upon  such  computation.  All  writing, 
especially  of  proper  names  and  figures,  should  be 
so  plain  as  to  make  mistakes  in  reading  impossi- 
ble. Any  tendency  to  carelessness  or  absent  mind- 
edness  must  be  promptly  corrected.  There  is  no 
safety  except  in  acquiring  permanently,  the  habit  of 
fixed  attention  to  the  matter  in  hand. 

5.  What  is  a  debit  ? 

It  is  a  term  applied  to  amounts  that  are  entered  in 
the  left-hand,  or  "debit,"  column  of  a  book  or  of 
an  account. 

6.  What  is  a  credit  ? 

A  term  applied  to  an  amount  entered  on  the  right- 
hand,  or  "credit,"  column  of  a  book  or  of  an  ac- 
count. 

7.  Upon  what  general  principle  is  double  entry 
bookkeeping  based  f 

Upon  the  principle  of  debit  and  credit. 

8.  What  is  this  principle  ? 

The  debits  and  credits  arising  from  any  transac- 
tion or  series  of  transactions,  equal  in  amount. 

9.  What  is  an  entry  f 

Any  formal  record  of  a  business  transaction. 

10.-  W hat  do  you  mean  by  debiting  an  account  ? 

Making  a  charge,  or  entry,  against  that  account, 
of  a  certain  amount,  which  amount  is  to  be  posted 
10  the  debit  side  of  the  account. 

11.    What  do  you  mean  by  crediting  an  account  ? 

Making  an  entry  of  a  certain  sum  in  favor  of  the 
account,  which  sum  is  to  be  posted  to  the  credit  side 
of  the  account. 


12.  What  is  meant  by  the  balance  of  an  account  t 
The  difference  between  the  sums  obtained  by  add- 
ing the  opposite  sides  of  the  account. 

13.  Give  a  general  rule  for  debits. 

We  debit  what  we  receive,  or  what  costs  us  value. 
We  debit  persons  when  we  sell  to  them  on  account, 
or  pay  them  on  account. 

11/..    Give  a  general  ride  for  credits. 

We  credit  what  we  part  with,  or  what  produces  us 
value.  We  credit  persons  when  we  buy  of  them  on 
account,  or  when  they  pay  us  on  account. 

15.  When  do  you  debit  Cash  f 
When  it  is  received. 

16.  When  do  you  credit  Cash  ? 
When  it  is  paid  out. 

17.  When  do  you  debit  Merchandise  ? 
When  it  is  bought  or  received. 

18.  When  do  you  credit  Merchandise  ? 
When  it  is  sold  or  parted  with. 

19.  When  do  you  debit  Expense  ? 

When  we  pay  out  casb,  or  otherwise  buy  anything 
required  for  the  business,  as  for  rent,  taxes,  fuel, 
lights,  clerk  hire,  or  the  like. 

20.  When  do  you  debit  a  person  ? 

When  he  becomes  indebted  to  us,  or  when  we  pay 
him  on  account. 

21.  When  do  you  credit  a  person  ? 

When  we  become  indebted  to  him,  or  when  he  pays 
us  on  account. 

22.  When  do  you  debit  Bills  Payable  ? 

When  we  pay  wholly  or  in  part,  our  own  note  or 
other  written  promise  to  pay. 

23.  When  do  you  credit  Bills  Payable  ? 

When  we  issue  our  own  note,  or  other  written 
obligation. 

24.  What  is  meant  by  "opening  the  books "  ? 

Making  a  journal  entry,  setting  forth  the  charac- 
ter and  purpose  of  the  business,  the  amount  and  kind 
of  resources  invested,  and  a  statement  of  the  liabili- 
ties, if  any. 

25.  What  is  meant  by  a  book  of  original  entry  ? 
A  book  in  which  the  first  record  of  a  transaction 

appears.      In  the  Jobbing.  Business  the  Journal    is 
the  only  book  of  original  entry. 

26.  In  what  book  are  the  accounts  of  a  business 
kept  ? 

In  the  Ledger. 


DEPOSITS  AND  CHECKS 

27.  Why  are  checks  treated  as  cash  ? 

Because  they  are  payable  on  demand,  and  are  ac- 
cepted among  business  men  as  the  equivalent  of 
cash. 

28.  What  is  the  effect  of  the  words  "  to  the  order 

of"  f 

They  denote  that  the  person  who  receives  the  check 
may,  if  he  wishes,  by  means  of  an  indorsement,  or- 
der the  check  to  be  paid  to  some  other  person. 


GENERAL    REVIEW 


63 


29.  What  is  an  "Indorsement  in  Blank"  or 
11  Blank  Indorsement "  ? 

The  act  of  the  payee  in  writing  hi*  name  only 
across  the  back  of  a  check  or  other  business  paper. 

SO.    What  is  the  effect  of  a  blank  indorsement  t 

It  makes  the  check  payable  to  whoever  holds  it  ; 
it  also  makes  the  indorser  responsible  for  such  pay- 
ment. 

81.  When  you  deposit  checks,  why  should  you 
indorse  them  ? 

In  order  to  transfer  the  title,  and  that  the  banker 
may  know  the  person  from  whom  the  checks  were 
received. 

32.  If  the  debit  footing  of  the  Pass  Book  is 
greater  than  the  credit  footing,  what  does  the  differ- 
ence, or  balance,  show  ? 

The  balance  on  deposit. 

S3.  If  the  credit  footing  of  the  Pass  Book  is 
greater  than  the  debit  footing,  what  does  the  differ- 
ence show  ? 

The  amount  overdrawn. 


THE  CASH  AND  BANK  ACCOUNTS 

34-    What  does  the  term  "  Cash  "  include  f 
Money  on  hand,  or  in  bank,  or  any  demand  or 
sight  paper  immediately  convertible   into   cash,   as 
checks,  bank  drafts,  express  or  post-office  money- 
orders,  etc. 

35.  What  is  the  purpose  of  the   Cash  account  ? 
To  keep  a  record  of  all  cash  received  and  all  cash 

paid  out. 

36.  What  is  shown  by  the  respective  sides  of  the 
Cash  account  f 

The  debit  side  shows  all  cash  received,  and  the 
credit  side  all  cash  paid  out 

37.  Which  side  of  the  Cash  account  should  be 
the  greater,  and  why  ? 

The  debit  side,  as  we  cannot  pay  out  more  cash 
than  we  receive. 

38.  What  does  the  balance  of  the  Cash  account 
show  ? 

The  amount  of  cash  on  hand. 

39.  What  is  a  Banking  Ledger  ? 

It  is  a  book  in  which  a  depositor  keeps  his  account 
with  the  bank. 

40.  What  should  the  debit  side  of  this  book  show  ? 
The  sums  deposited. 

41.  What  should  the  credit  side  of  this  book 
shoic  ? 

The  amount  of  each  check  drawn. 

42.  If  the  debit  side  of  this  book  is  the  greater, 
what  does  the  balance  show  f 

The  sum  to  the  depositor's  credit  at  the  bank. 

43.  When  will  the  balance  of  the  Banking  Ledger 
agree  with  the  balance  of  the  Pass  Book  ? 

When  all  checks  that  we  have  drawn  on  the  bank 
have  been  paid  at  the  time  the  Pass  Book  was 
written  up. 


44-    When  woidd  the  balance  disagree  f 
When  the  Pass  Book  is  balanced   before  all  the 
checks  have  been  paid. 

45.  When  would  the  balance  of  the  Banking 
Ledger  agree  with  that  of  the  Cash  account? 

When  all  cash  has  been  deposited. 

46.  When  will  the  respective  balances  of  the  Pass 
Book,  Banking  Ledger,  and  Cash  account  all 
agree  ? 

When  all  cash  has  been  deposited  and  all  checks 
nave  bten  paid  at  the  time  the  books  are  balanced. 


THE  MERCHANDISE  ACCOUNT. 

47.  What  does  the  term  ' '  Merchandise  "  imply  ? 
All  goods  in  which  we  deal  for  purposes  of  profit. 

48.  What  does  the  debit  side  of  the  Merchandise 
account  show  ? 

The  various  sums  that  merchandise  has  cost  us. 

49.  What  does  the  credit  side  of  the  Merchan- 
dise account  show  f 

The  various  sums  for  which  we  have  sold  mer- 
chandise. 

50.  Under  what  circumstances  will  the  Merchan- 
dise account  show  a  gain  ? 

When  the  credit  side  is  greater  than  the  debit  side. 

51.  Under  what  circumstances  will  the  Merchan- 
dise account  show)  a  loss  f 

When,  all  goods  have  been  sold  and  the  debit  side 
is  greater  than  the  credit  side. 


PERSONAL  ACCOUNTS 

52.  What  is  a  personal  account  ? 
An  account  with  a  person  or  firm. 

53.  What  is  meant  by  selling  goods  on  account  ? 

Selling  them  on  credit,  that  is,  without  receiving 
payment  for  them  at  the  time  of  making  the  sale. 

54-    What  does  the  debit  side  of  a  personal  ac- 
count show. 

The  debits,  or  charges,  we  have  made  for  what  the 
person  has  received  from  us. 

55.  W hat  does  the  credit  side  show  ? 

The  credits  we  have  allowed  the  person  for  what 
we  have  received  from  him. 

56.  If  the  debit  side  of  a  personal  account  is 
the  greater,  what  does  the  balance  show  f 

The  amount  the  person  owes  us  on  account. 

57.  If  the  credit  side  is  the  greater,  what  does 
the  balance  show? 

The  amount  we  owe  the  person  on  account. 


JOURNALIZING 

58.    What  is  a  journal  entry  ? 

A  formal  record  in  the  Journal  of  a  business 
transaction,  together  with  a  list  of  the  Ledger 
accounts  affected  by  the  transaction,  and  the  debit 
or  credit   amounts  that   are  to  be  posted. 


64 


GENERAL    REVIEW 


59.  In  determining  the  proper  journal  entry  re' 
quired  for  any  transaction,  what  two  questions  must 
be  decided? 

(1)  '  <  What  accounts  are  affected  P  " 

(2)  ' '  How  are  they  affected  ?  " 

60.  If  merchandise  is  sold  for  a  check,  what  ac- 
counts are  affected? 

The  Merchandise  account  and  the  Cash  account. 

61.  How  are  these  accounts  affected? 

The  Cash  account  is  debited  and  the  Merchandise 
account  is  credited. 

62.  What  is  the  proper  order  in  arranging  the 
debits  and  credits  of  a  journal  entry  ? 

The  debits  should  be  given  first,  and  then  the 
credits. 

63.  Gave  my  clerk  a  check  for  $25  for  his  week's 
salary,  what  accounts  are  affected,  and  how  ? 

Expense  is  debited  and  Cash  is  credited. 

64-    Bought  a  bill  of  goods  of  Cook  &  Co. ,  on 

account.      What  accounts  are  affected,  and  how  ? 

Merchandise  is  debited  and  Cook  &  Co.  credited. 

65.  How  can  you  give  a  brief  answer  to  the  pre- 
ceding question  ? 

By  giving  the  form  of  the  journal  entry  thus  : 
"Mdse.  to  Cook  &  Co." 


EXERCISE  IN  JOURNALIZING 

1.  Sold  R.  Wilson  mdse.  on  account.  What 
entry  ?     Why  ? 

R.  Wilson  to  Mdse. ;  because  Wilson  nas  increased 
Vs  indebtedness  to  us,  and  we  have  parted  with  mdse. 

2.  Bought  mdse  of  P.  Johnson  on  account. 
What  entry?      Why? 

Mdse.  to  P.  Johnson  ;  because  mdse.  has  been 
received,  and  our  indebtedness  to  Johnson  has  been 
increased. 


W.   Dalton,    receiving   in 
What  entry   is   re- 


3.  Sold  mdse  to  R 
payment  his  check  for 
quired,  and  why  ? 

Cash  to  Mdse. ;  because  a  check  is  equivalent  to 
cash,  and  we  have  parted  with  mdse. 

4-  Bought  10  brls.  of  salt  of  C  W.  Johnson, 
giving  in  payment  my  note  at  thirty  days.  What 
entry  ? 

Mdse   to  Bills  Payable. 


5.  Bought  of  Martin  &  Co.  50  brls.  of  flour. 
Gave  my  check  in  payment.       What  entry  ? 

Mdse.  to  Cash. 

6.  Paid  N.  Davis  cash  on  account.  What 
entry  ?      Why  ? 

N.  Davis  to  Cash  ;  because  our  indebtedness  to 
Davis  has  been  lessened,  and  we  have  parted  with 
cash. 

7.  C.  Miller  pays  us  cash  on  account.  What 
entry  ?      Why  ? 

Cash  to  C.  Miller  ;  because  we  have  received  cash, 
and  Miller's  indebtedness  to  us  has  been  lessened. 

8.  Gave  Charles  Hill  a  check  for  $50  in  settle* 
ment  of  our  account  in  full.      What  entry  ? 

Charles  Hill  to  Cash  ? 

9  Received  of  Henry  Shaw  a  check  for  $100  in 
settlement  of  his  account  to  date.      What  entry  ? 

Cash  to  Henry  Shaw. 

10.  Sold  R.  S  Jones  20  brls.  of  apples,  receiv- 
ing his  check  in  payment.      What  entry  $ 

Cash  to  Mdse. 

11.  R.  T.  Cook  bought  of  us  50  brls.  of  salt  on 
account,  at  thirty  days.      What  entry  ? 

R.  T.  Cook  to  Mdse. 

12.  Borrowed  cash  of  L.  T.  Mason  on  our  note 
at  xixty  days.      What  entry  ? 

Cash  to  Bills  Payable. 

13.  Sold  C.  W.  Lyman  500  brls.  of  lard,  re- 
ceiving in  payment  Mr.  Lyman's  check  on  the  First 
National  Bank.      What  entry  ? 

Cash  to  Mdse. 

llf.  J.  Knapp  sold  goods  to  R.  Day  on  account. 
Required  Hnapp's  entry. 

R.  Day  to  Mdse. 

15.  Required  Day's  entry. 
Mdse  to  J.  Knapp. 

16.  H  Stevens  paid  W.  Jones  cash  on  account. 
Required  Stevens''  entry. 

W.  Jones  to  Cash. 

17.  Required  Jones'  entry. 
Cash  to  H.  Stevens. 


345.  The  first  8 1  transactions  are  with  the  offices  and  for  the  purpose  of  expediting  the  work 
and  advancing  you  rapidly,  you  have  been  instructed  in  several  instances  to  give  or  take  a  note  at 
the  time  of  purchase  or  sale.  But  from  now  on  you  will  not  give  or  take  a  note  until  maturity  of 
the  account.  Your  Daily  Reminder  is  to  aid  you  to  keep  track  of  when  accounts  mature.  Or  you 
may  make  memorandum  on  the  student's  Ledger  account. 

Your  school  will  set  a  certain  number  of  days,  as  for  instance,  4  days,  to  represent  a  school 
month,  1  day  to  represent  a  school  week,  etc.;  and  you  will  then  figure  on  this  basis  to  find  the 
maturity  of  your  papers.     For  different  kinds  of  notes,  see  pages  217-219. 


JOBBING  BUSINESS 


65 


DRAFTS 

346.  A  draft  is  a  written  order  on  a  bank,  firm,  or  individual,  directing  the  payment  of  money 
to  some  person  or  firm  named  in  the  draft. 

Parties  to  a  Draft. — There  are  three  parties  to  a  draft: 
i.     The  Drawer,  or  person  who  signs  the  draft. 

2.  The  Drawee,  or  person  to  whom  the  draft  is  addressed,  and  who  is  expected  to  pay  the  sum 
ncf.med. 

3.  The  Payee,  or  person  to  whom  the  money  is  directed  to  be  paid. 

Theory  of  a  Draft. — In  general,  when  a  draft  is  drawn,  it  is  presumed  that  the  drawee  is  indebted 
to  the  drawer,  also  that  the  drawer  is  indebted  to  the  payee.  But  circumstances  often  arise  when 
drafts  are  drawn  without  the  existence  of  such  indebtedness. 

How  To  Write  a  Draft. — Make  out  all  drafts  according  to  the  following  general  forms.  Write 
the  name  of  the  p:.yee  in  that  part  of  the  form  where  the  name  "E.  O.  Folsom"  appears,  place  the 
name  cf  the  drawee  in  place  of  the  name  "A.  B.  Cummings,"  and  your  own  name  instead  of  "H.  B. 
Burton." 

Fill  out  the  stub    before  detaching  the  draft,  as  in  the  case  of  checks. 

347.  Sight  Draft. — A  sight  draft  is  one  that  is  payable  on  presentation,  except  in  certain  States, 
where  days  of  grace  are  allowed. 

Some  authorities  say  to  treat  sight  drafts  as  cash,  but  we  prefer  that  they  be  treated  as  Bills  Rec. 
You  will  ask  your  teacher  for  instructions  regarding  this,  as  custom  varies  according  to  locality. 


No._Z_ 


Date    /X-g^       /y  190^. 

Time   C-/^'  -v^Wa-^-^- 
/-  Eavor  <jf/ 


Order  of_ 

Value  received  and  charge  the  same  to  account  of 


^r  xs.\ji±*e<  kjs — jc — ^-c _ ^.«-~    ~ —    — — - ; if— " — «— j --=^- 

^J^ZA^i^y  S7LU^^/sLS^f  yZ*^^^y^<t^J/7//a6>  DOLLARS 


~Z?^^-/2^A^t^-y^ 


J^L^T^^z^jy '  \-@~gr. 


348.  Time  Draft. — (Time  reckoned  from  sight.)  A  draft  may  be  drawn  payable  a  certain 
number  of  days  or  months  "after  sight,  "  as  in  the  following  form.  This  draft  would  not  be  payable 
until  ten  days  after  acceptance  (or  thirteen  days,  in  States  allowing  days  of  grace). 


No. 


^=r 


Time  £&-  /O  ^£cZ-J.  _-te^^ 
Favor  of 


Drawn  on 


For    ^Jl^^y  2K   ^. 


/^>— 6 


*"N 


No. 


'^ZlS/V.     (P^^rtA, 


Order  of. 


DOLLARS 


Value  received  and  charge  the  same  to  account  of 


Value 
To. 


66 


JOBBING  BUSINESS 


349.  Time  Draft. — (Time  reckoned  from  date.)  The  following  form  illustrates  a  draft  payable 
a  certain  time  after  date.  This  draft  matures  at  a  definite  time,  November  5  (or  November  8,  if  days  of 
grace  are  allowed). 


No.. 


v5 


Favor  of 

ALn£ 

<^  D 


^\ 


No.  -<3- 


Order  of. G?-  cJ^ 


t    (Vsrst,  ^iy 


P^l^t^^u^^Y^ 


DOLLARS 


Value  received  and  charge  the  same  to  account  of 


To 


JSlcj 


350.  Bank  Draft. — A  Bank  Draft  is  an  ordinary  draft,  drawn  by  one  bank  on  another,  ana  is 
used  to  remit  money  from  one  portion  of  the  country  to  another,  without  actually  transferring  the 
currency.  Drafts  drawn  on  New  York  are  called  "New  York  drafts,"  and  drafts  drawn  on  Chicago  are 
called  "Chicago  drafts."  New  York  Drafts  are  at  par  anywhere  in  the  United  States,  and  are  usually 
preferred  for  making  remittances. 

A  bank  draft  should  always  be  made  payable  to  the  order  of  the  person  making  the  remittance,  who 
transfers  it  by  indorsement. 


Ha..4~. 


jjfe^e^i^.. 


Favor  of , 

Sold  to 

Mo  fit- M.  $4S/& 


ACCEPTANCES 

351.  "Accepting  a  draft"  consists  in -the  drawee's  writing  across  the  face  the  word  "Accepted," 
with  the  date  and  his  signature  following.     This  is  usually  done  in  red  ink. 

352.  A  draft  thus  accepted  is  called  an  Acceptance-  The  acceptance  of  a  draft  by  the  drawee  is 
equivalent  to  his  written  promise  to  pay  it.  Hence,  an  acceptance  is  equivalent  to  the  cJrawee"s  prom- 
issory note. 


Date     dLt^A   /, tgn  a\ 

Time   ~^Z^ 


%<Z*r0'f* 


.Pay  to  the 


?0 


3.yc 


^iJ^/V^DOLLARS 


JOBBING  BUSINESS  67 

353.  Drafts  Drawn  "After  Sight." — Drafts  drawn  payable  a  certain  time  "after  sight"  must 
be  presented  by  the  payee  to  the  drawee  for  acceptance,  as  the  time  is  reckoned  from  the  date  of 
acceptance,  and  not  from  the  date  of  the  draft. 

354.  Drafts  Drawn  "After  Date." — A  draft  that  is  payable  a  certain  number  of  days  or 
months  afterdate,  will  become  due  without  being  accepted;  but  it  is  advisable  to  have  such  a  draft 
accepted,  as  this,  at  once,  makes  the  drawee  responsible  for  its  payment  when  due. 

355.  Dishonoring  a  Draft. — Banks  in  the  various  cities  of  the  United  States  collect  thousands  of  drafts 
every  day.  Some  business  men  do  not  remit  for  the  goods  which  they  have  purchased,  but  prefer  to  wait  until 
a  draft  is  drawn  upon  them  for  the  amount  due.  It  often  happens  that  some  people  are  more  likely  to  pay  drafts 
drawn  upon  them  for  amounts  which  are  due  than  they  are  to  send  a  remittance  if  a  statement  of  account  is 
sent  them,  hence  the  draft  plays  an  important  part  in  collecting.  A  person  is  not  obliged  to  accept  a  draft  when 
presented,  but  if  the  account  is  due  and  he  refuses  a  draft  for  the  amount,  he  is  quite  liable  to  injure  his  credit. 
It  often  becomes  necessary  for  business  men  to  borrow  money  at  banks,  and  if  they  habitually  refuse  to  honor  drafts, 
the  bank  would  soon  refuse  to  give  them  credit.  When  a  person  refuses  to  pay  or  accept  a  draft  that  is  drawn 
upon  him,  the  draft  is  said  to  be  "dishonored." 

356.  It  often  occurs  that  business  men  draw  drafts  upon  their  customers  and  then  discount  these  drafts  at 
their  bank,  obtaining  credit  for  them  just  as  they  would  for  notes.  Sometimes  it  happens  that  such  drafts  are  dis- 
honored when  presented  to  the  drawee,  but  the  drawer  is  by  law  responsible  for  the  payment  of  any  draft  which 
he  has  discounted  at  his  bank  or  passed  to  someone  else  for  any  reason,  and  must  make  good  the  amount  of  any 
dishonored  draft.  It  frequently  happens  that  a  person  holding  a  bill,  note,  or  draft  on  someone  else  who  lives  in 
some  other  town,  finds  it  necessary  to  send  such  paper  for  collection  to  someone  who  is  little  known  or  to  some 
bank  other  than  the  one  with  which  he  is  in  the  habit  of  doing  business.  In  such  cases  he  should  indorse  the 
draft  payable  to  whoever  he  desires  to  collect  it  for  him,  and  should  add  after  the  indorsement,  "for  collection." 
The  effect  of  this  is  that  the  draft  or  other  paper  cannot  be  transferred  to  anyone  else,  because  anyone  to  whom 
it  may  be  offered  can  see  that  it  was  the  business  of  the  person  presenting  it  to  him  to  collect  it  on  the  in- 
dorser's  account.  Some  banks,  however,  refuse  to  handle  drafts  indorsed  "for  collection,"  and  it  is  not  necessary 
to  so  indorse  drafts  when  you  are  doing  business  with  people  whom  you  know  to  be  responsible.  You  should  never 
draw  a  draft  on  a  person  without  first  advising  him  of  the  fact.  It  is  better  always  to  write  the  drawee  of  the 
draft  a  letter,  stating  the  date  of  your  draft,  to  whom  it  is  payable,  and  the  amount.  This,  of  course,  is  not 
necessary,  but  is  ordinary  business  courtesy  and  should  be  adopted  in  all  cases. 

STATEMENT  OF  ACCOUNT 

357-  A  statement  of  a  personal  account  is  an  exhibit  of  the  debits  and  credits  of  the  account,  as 
shown  by  the  Ledger.  In  a  retail  business,  as  a  rule,  such  statements  are  made  out  periodically, 
usually  at,  or  near  the  first  day  of  the  month,  and  are  presented  or  sent  for  collection  to  all  cus- 
tomers who  owe  the  firm  on  account. 

358.  In  the  wholesale  trade,  a  statement  of  account  is  usually  rendered  at  the  expiration  of  the 

term  of  credit  that  has  been  allowed  on  any  sale.     In  this  case  the  statement  is  sent  as  a  reminder 

that  payment  for  the  specified  sale  is  due,  and  should  be  paid.     A  general  statement  showing  the 

entire  account  is  not  made  out,  except  by  special  request.     While  a  wholesaler's  statement  of  account 

will  not  show  debit  items  that  are  not  yet  due,  it  must  nevertheless  show  all  credits  or  payments  that 

have  been  made  since  the  issue  of  the  previous  statement. 

Checking  a  Statement. — (1)  If  you  receive  a  statement  of  account  with  John  Doe,  the  debits  on  his  state- 
ment should  agree  with  the  credits  of  his  account  on  your  Ledger  because  he  receives  and  would  debit  what  you 
part  with,  and  the  credits  on  his  statement  should  agree  with  the  debits  of  his  account  on  your  Ledger  because 
he  gives  out  and  credits  what  you  receive. 

(2)  If  the  credit  side  of  your  Ledger  does  not  agree  with  the  debits  on  his  statement,  either  in  dates  or 
amounts  or  items,  refer  to  the  book  of  original  entry  or  vouch*  r  (original  paper),  and  get  the  correct  date,  amount, 
and  item  (name  of  article),  and  make  note  on  his  statement  of  these  facts  in  order  that  you  may  write  him  and 
have  correction  made.  If  the  credit  side  of  his  statement  agrees  with  the  debit  side  of  your  Ledger,  check  each 
item  thus:   "^\" 

(3)  If  you  find  dates,  amounts,  or  items  on  his  statement  that  do  not  appear  on  your  Ledger,  examine 
your  books  of  original  entry  and  your  vouchers.  Vouchers  may  be  found  among  your  papers  that  were  not  en- 
tered on  your  books.  If  no  invoice  corresponding  with  the  dates,  amounts,  or  items  on  his  statements,  write,  in 
red  ink,  on  his  statement,   "No  invoice,  etc." 

(4)  If  the  amounts  and  items  agree,  but  the  date  differs,  go  to  your  books  of  original  entry  and  determine 
the  correct  date.  The  date  may  have  been  changed  in  posting.  If  date,  amount,  or  item  should  differ,  make  note 
of  the  difference  on  the  statement. 

(5)  If  all  the  debits  of  his  statement  agree  with  the  credits  on  your  Ledger,  then  check  the  credits  of  his 
statement  with  the  debits  on  your  Ledger. 

(G)  If  discrepancies  occur,  make  note  of  them  on  the  statement  below  his  last  amount  or  balance,  and  deduct 
the  amount  of  the  discrepancies  from  the  amount  of  his  statement,  or  add  them  as  the  case  may  require. 

(7)  If  his  statement  is  found  to  agree  with  your  Ledger  in  every  particular,  write  "O.K."  on  the  statement 
and  sign  your  name  or  initials. 

(8)  Present  the  "O.  K'd"    statement  to  your  proprietor  and  ascertain  when  payment  is  to  be  made. 

359.  When  a  statement  is  paid,  it  should  be  receipted  as  in  No.  7.  If  the  statement  has  been  sent  by  mail, 
and  the  debtor  remits  payment  in  full,  he  should  return  the  statement  with  the  remittance  for  the  creditor's  re- 
ceipt.    Upon  receiving  the  statement  and  remittance,  the  creditor  should  at  once  receipt  the  statement  and  return  it. 

360.  When  bills  have  been  given  for  each  sale  on  account,  it  is  not  customary  to  itemize  the  statement. 
But  if  bills  have  not  been  rendered  for  the  sales,  the  statement  should  be  itemized  as  in  No.   7. 

361.  The  making  out  of  statements  in  correct  form  is  an  important  matter,  and  one  with  which  the  student 
should  become  thoroughly  familiar. 

363.  The  following  forms  illustrate  the  proper  manner  of  making  out  statements  under  the  conditions  set 
forth  over  each  form : 


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GENERAL  REVIEW 


SPECIAL  REVIEW  QUESTIONS 

1.  How  should  an  incorrect  entry  be  corrected? 

2.  When  the  place  of  payment  is  not  specified  in  a 
note,  where  is  the  note  payable? 

3.  What  reason  for  being  prompt  in  making  deposits 
at  the  bank  ?    ' 

4.  What  is  said  of  the  importance  of  good  figures? 

5.  What  is  the  general  rule  for  journalizing? 

6.  If  a  note  or  other  obligation  falls  due  on  a  holiday, 
when  may  it  be  collected? 

7.  What  course  should  be  pursued  in  the  case  of  part 
payment  of  a  note? 

8.  State  the  various  uses  of  the  Daily  Reminder. 

9.  What  is  the  general  purpose  of  the  Sales  Book? 
.10.  What  classes  of  sales  are  recorded  in  the  Sales 

Book? 

11.  Explain  how  the  keeping  of  a  Sales  Book  lessens  the 
labor  of  a  bookkeeper. 

12.  To  what  side  of  the  Ledger  accounts  are  the  various 
amounts  of  the  Sales  Book  posted  ? 

13.  What  is  a  draft? 

14.  Name  the  parties  to  a  draft. 

15.  State  the  theory  of  a  draft. 

16.  What  is  a  sight  draft? 

17.  Under  what  circumstances  is  a  sight  draft  to  be 
considered  as  a  bill  receivable? 

18.  What  is  a  statement  of  account? 

19.  At  what  time-are  statements  usually  made  out  in  a 
retail  business? 

20.  At  what  time  is  a  statement  usually  made  out  in  a 
wholesale  business? 

21.  What  is  the  general  purpose  of  a  statement? 

22.  What  general  difference  between  a  wholesaler's 
and  a  retailer's  statement? 

23.  What  is  the  usual  procedure  on  the  part  of  both 
debtor  and  creditor  when  a  statement  is  sent  by  mail 
for  collection,  and  paid  in  full? 

24.  Under  what  circumstances  is  it  unnecessary  to 
itemize  a  statement? 

25.  When  should  a  statement  be  itemized? 

26.  In  closing  the  books,  if  there  is  an  inventory  of 
merchandise,  where  should  it  be  entered  in  the  Ledger? 

27.  Why  must  the  merchandise  inventory  be  added  to 
the  sales? 


QUESTIONS  AND  ANSWERS 
BILLS  PAYABLE  AND  BILLS  RECEIVABLE 

1.  In  writing  a  note,  what  specifications  should  be 
set  forth  f 

The  face  of  the  note,  time,  date,  name  of  the 
payee,  rate  of  interest,  if  any,  and  the  maker's  sig- 
nature. 


2.  What  is  the  purpose  of  the  Bill  Boole  ? 

To  afford  a  record  of  all  written  promissory  obliga- 
tions, whether  received  or  issued. 

3.  What  ledger  account  is  kept  with  the  proprie- 
tor's  own  loritten  obligations  ? 

The  Bills  Payable  account. 

If..    What  does  the  credit  side  of  this  account  show  ? 
The  face  of  all  notes,  acceptances,  or  other  written 
obligations  issued  by  the  proprietor. 

5.  What  does  the  debit  side  show  ? 

The  payments  that  have  been  made  on  the  bills 
payable. 

6.  What  does  the  debit  side  of  the  Bills  Receivable 
account  show  ? 

The  face  of  each   bill   receivable   that  we  have 
received. 

7.  What  does  the  credit  side  show  f 

That  which  we  have  received  for  Bills  Receivable. 

8.  When  do  you  debit  Bills  Payable  f 

When  we  pay  any  of  our  bills  payable,  either 
wholly  or  in  part. 

9.  When  do  we  credit  Bills  Payable  ? 
When  we  issue  our  own  written  obligations. 

10.  When  do  we  debit  Bills  Receivable  f 
When  we  receive  a  bill  receivable. 

11.  When  'do  we  credit  Bills  Receivable  f 

When  we  receive  payment,  either   wholly  or  in 
part,  for  a  bill  receivable. 

12.  What  is  shown  by  the  balance  of  the  Bills 
Payable  account  f 

The  amount  we  owe  on  bills  payable. 

13.  What  does  the  balance  of  the  Bills  Receivable 
account  show  f 

The  amount  that  is  owed  to  us  on  bills  receivable. 


DRAFTS  AND  ACCEPTANCES. 

llf.    What  is  the  general  purpose  of  drafts  ? 
To  facilitate  collections  and  remittances. 

15.  Illustrate  this. 

If  A  who  is  in  St.  Louis  owes  B  who  is  in  Chicago; 
B  may  draw  a  draft  on  A  for  the  amount  of  the 
debt,  place  it  with  his  banker  for  collection,  who  for- 
wards it  to  a  bank,  or  other  collection  agency  in 
St.  Louis.  If  paid  by  A  the  amount,  less  charges 
for  collection,  is  then  remitted  to  B  through  the  bank 
to  which  the  draft  was  originally  given.  If  A  w.shes 
to  remit  to  B,  he  may  buy  a  draft  on  Chicago  of 
his  local  banker,  and  remit  the  same  to  B  by  mail. 

16.  What  is  the  advantage  of  time  drafts  to  the 
drawee  f 

To  enable  the  drawee,  especially  in  the  case  of  a 
large  sum,  to  have  a  certain  time  In  which  to  arrange 
for  the  payment. 


[70] 


GENERAL    REVIEW. 


71 


17.  What  act  is  necessary  in  order  that  the  drawee 
may  become  responsible  for  the  payment  of  a  draft  ? 

The  act  of  accepting  it. 

18.  When  we  draw   a   draft,   and  deliver  it   to 
another  person,  what  account  should  be  credited? 

The  drawee's  account. 

19.  When  is  a  sight  draft  payable  ? 

Upon  presentation,  except  where  days  of  grace  are 
allowed. 

20.  What  drafts  are  considered  as  cash   by   the 
person  receiving  them  ? 

Sight  drafts  where  no  days  of  grace  are  allowed. 

21.  By  whom  and  when  is  a  draft  considered  a 
bill  payable  ? 

By  the  drawee  when  he  accepts  it. 

22.  By  whom  and  when  are  drafts  considered  as 
bills  receivable? 

To  the  payee,  and  when  they  are  not  payable  im- 
mediately on  presentation. 


INDORSEriENTS  AND   NEGOTIABILITY 

23.    When  is  a  note  or  draft  said  to  be  negotiable  ? 
When  the  payee  is  authorized  by  the  terms  of  the 
instrument  to  transfer  it  by  indorsement. 

24-  What  phrase  in  the  wording  of  a  note  or 
draft  gives  the  payee  this  right  ? 

The  words  "or  order,"  "or  bearer,"  or  "to  the 
order  of." 

25.  What  is  the  effect  of  drawing  an  instrument 
payable  to  bearer  ? 

It  makes  the  instrument  negotiable  and  transfer- 
able without  indorsement. 

26.  Name  two  important  effects  of  an  indorse- 
ment. 

It  authorizes  the  payment  of  the  obligation  to  a 
person  other  than  the  indorser.  The  indorser  also 
becomes  responsible  for  the  payment  of  the  paper, 
should  payment  be  refused  by  the  maker  when  due. 

27.  What  advantage  is  secured  to  the  payee  by 
making  papers  payable  ' '  to  order  "  instead  of  "  to 
bearer "  ? 

It  protects  the  paper  from  collection  in  the  event 
of  its  loss  or  theft,  as  a  paper  payable  "to  order"  is 
not  payable  until  indorsed  by  the  payee;  while  one 
payable  "to  bearer"  may  be  paid  to  any  one  who 
presents  it.  (For  a  fuller  discussion  of  indorsements 
with  examples  of  the  different  forms,  see  Part  II  of 
this  book.) 


HATURITY    OF  PAPERS 

28.  What  is  meant  by  the  maturity  of  a  com- 
mercial paper  ? 

The  day  on  which  it  falls  due. 

29.  If  a  note  falls  due  (without  days  of  grace)  on 
Saturday,  July  4)  when  should  it  be  presented  for 
collection  ? 

On  Monday,  July  6. 

80.  If  days  of  grace  are  allowcd}  when  would  this 
note  be  due  ? 


On  Tuesday,  July  7,  as  the  legal  holidays  are 
included  in  computing  the  time. 

81.  If  the  maker  of  an  indorsed  note  fails  to  pay 
the  same  upon  presentation  at  maturity,  what  course 
should  the  holder  pursue  ? 

The  holder  should,  within  twenty-four  hours,  notify 
the  indorsers  that  the  paper  has  been  dishonored. 

82.  Why  is  the  notice  necessary  ? 

In  order  to  hold  the  indorsers  responsible  for  the 
payment  of  the  paper. 


EXERCISE  IN  JOURNALIZING 

Bills  Payable  and  Bills  Receivable. 

1.  Bought  a  car-load  of  four,  giving  in  payment 
my  note  at  sixty  days.  What  accounts  are  af- 
fected ? 

Mdse.  and  Bills  Payable. 

2.  How  are  these  accounts  affected  ? 
Mdse.  is  debited  and  Bills  Payable  credited. 

8.  Gave  my  note  at  thirty  days,  in  payment  of  one 
month's  rent  in  advance.  What  accounts  are  af- 
fected, and  how  ? 

Expense  is  debited  and  Bills  Payable  is  credited. 

4-  Bought  twenty  brls.  of  salt,  giving  in  payment 
C.  W.  Cook's  note  in  favor  of  B.  Miller  and  indorsed 
to  me.      What  entry  ? 

Mdse.  to  Bills  Receivable. 

Give  the  required  entry  for  each  of  the  following 
transactions. 

5.  Gave  five  brls.  of  salt  to  Carter  &  Co. ,  in 
payment  of  my  note  at  thirty  days. 

Bills  Payable  to  Mdse. 

6.  James  Steele  settled  his  account  by  note  at  sixty 
days. 

Bills  Receivable  to  James  Steele. 

7.  Gave  a  check  for  $75,  in  payment  of  my  note 
in  favor  of  C.   W.  Miller. 

Bills  Payable  to  Cash. 

8.  Sold  Henry  Jones  three  brls.  of  flour  on  his 
note  at  thirty  days. 

Bills  Receivable  to  Mdse. 

9.  Beceived  of  S.  Johnson  his  check  in  payment 
of  his  note. 

Cash  to  Bills  Receivable. 

10.  Sold  to  B.  S  Gray  three  brls.  of  pork,  re- 
ceiving inpayment  G.  W  Thompson's  note,  in  favor 
of  Harvey  Brown. 

Bills  Receivable  to  Mdse. 

11.  Transferred  J.  W.  Smith's  note  in  my  favor 
to  B.  L.  Hall  on  account. 

R.  L.  Hall  to  Bills  Receivable. 

12.  Gave  my  note  to  Cook  &  Sons,  in  settle- 
ment of  account. 

Cook  &  Sons  to  Bills  Payable. 

18.  Sold  C.  S.  Davis  three  brls.  of  salt,  the 
amount  of  the  same  to  be  indorsed  on  my  note  in  his 
favor. 

Bills  Payable  to  Mdse. 


72 


JOBBING   BUSINESS. 


LEAD  PENCIL  WORK 

363.  It  is  a  true  saying  that  ' '  you  can  always  tell  a  poor  bookkeeper  by  the  amount  of  lead  pencil 
work  that  he  does. ' '  Never  use  a  lead  pencil  for  writing  receipts,  receipting  bills,  statements,  or  for  any 
other  kind  of  work  when  it  can  possibly  be  avoided.  While  the  law  says  that  a  signature  written  with  a 
lead  pencil  is  legal,  there  is  no  demand  or  appreciation  for  a  lead  pencil  bookkeeper. 

LEDGER    HEADINGS 

364.  Each  Ledger  Heading  of  a  Personal  Account  should  contain  the  customer's  full  name  and 
street  number,  or  if  he  lives  in  some  other  city,  the  name  of  the  city  should  be  added.  When  new 
customers  are  secured,  their  names  and  addresses  are  entered  in  the  Order  Book,  if  such  a  book  is 
kept,  otherwise  with  the  charge  in  the  Sales  Book,  or  Journal,  as  the  case  may  be,  and  the  full  information 
is  transferred  from  the  original  entry  to  the  Ledger  at  the  time  of  posting.  In  many  business  houses  it  is 
the  custom  to  enter  the  complete  address  with  each  charge,  and  this  should  always  be  done  where  it  hap- 
pens that  there  is  more  than  one  customer  of  the  same  name. 


CONSOLIDATED  ICE  CO. 


126  East  State  Street 


19 
Oct. 


19 
Oct. 


Inv. 


P 
C 

J 
42 


iriPORTANT  POINTS  ON  POSTING 

365.  When  you  post  from  more  than  one  book  of  original  entry  you  should  enter  in  or  near  the 
folio  column  in  the  Ledger  a  letter  to  indicate  the  book  from  which  you  posted;  thus  in  the  Ledger 
form  given  above,  the  first  entry  on  the  debit  side  shows  that  the  amount  was  posted  from  Journal 
page  io,  the  second  entry  on  the  debit  side  shows  that  the  amount  was  posted  from  Sales  Book 
page  2,  the  third  entry  on  the  debit  side  shows  that  the  amount  was  posted  from  Cash  Book  page  3.  The 
first  entry  on  the  credit  side  shows  that  the  amount  was  posted  from  Purchase  Book  page  2,  the  second 
entry  on  the  credit  side  shows  that  -the  amount  was  posted  from  Cash  Book  page  4.  In  writing  the  abbre- 
viations for  the  books  you  will  note  that  just  one  letter  is  used,  C.  for  Cash  Book;  J.  for  Journal;  S.  for 
Sales  Book;  and  P.  for  Purchase  Book. 

366.  Sometimes  it  is  customary  to  post  the  Mdse.  credits  direct  from  the  Invoice  File  to  the  credit 
side  of  the  Ledger  Account,  and  the  fourth  entry  on  the  credit  side  of  the  Ledger  Account  referred  to 
above  indicates  that  the  item  was  so  posted,  and  that  to  rind  the  original  entry  we  would  refer  to 
Invoice  No.  42.  • 

36*7.  Duplicate  Bills. — The  shortest  methods  of  making  duplicates  of  bills  which  you  render  are  the 
copying-press  and  the  carbon-copy  plans.  If  you  use  the  copying-press  method  all  bills  you  make  out 
should  be  made  with  copying-ink,  after  which  they  are  copied  in  the  copying-book  and  then  delivered  to 
the  customer.  When  the  carbon-copy  plan  is  used  the  copy  is  made  out  at  the  same  time  the  bill  is  made, 
the  form  for  the  bill  being  especially  prepared  for  this  purpose.  The  original  copy  is  then  delivered  to  the 
customer,  and  the  duplicate  is  filed  by  some  convenient  method,  the  principal  one  of  which  is  to  have  what 
is  called  a  loose-leaf  binder  in  which  all  duplicate  bills  are  placed  at  the  close  of  the  day's  business.     When 


JOBBING   BUSINESS  73 

either  of  these  plans  is  used  the  footings  may  be  carried  forward  each  day  until  the  end  of  the  week  or 
month,  the  same  as  in  a  regular  Sales  Book,  at  which  time  the  total  amount  of  the  merchandise  sales  is 
posted  to  the  credit  side  of  the  Ledger  Account. 

368.  Corrections  and  Duplicate  Bills.  It  sometimes  happens  in  the  business  office  that  an 
error  is  made  in  rendering  a  bill  for  merchandise  sold  and  the  buyer  returns  the  bill  for  correction.  In  this 
case  the  bill  should  be  made  out  correctly  and  the  words  "Corrected  Bill"  written  across  the  face.  Some- 
times it  is  customary  to  write  "Corrected  Invoice,"  as  the  terms  bill  and  invoice  are  used  interchangeably. 
It  sometimes  happens  that  the  purchaser  looses  the  bill  after  receiving  it,  or  because  of  some  carelessness 
in  mailing,  it  may  never  reach  him.  In  this  case  you  would  make  out  a  new  bill  and  write  across  its  face 
"Duplicate  Bill,"  to  show  that  it  is  a  copy  of  some  bill  previously  rendered. 

369.  Personal  Accounts  are  those  accounts  which  we  have  with  the  people  or  business  firms  with 
whom  we  do  business,  and  are  considered  to  be  the  most  important  accounts  connected  with  any  business. 
It  is  absolutely  necessary  to  know  just  how  much  we  are  owing  other  people,  and  just  how  much  other 
people  are  owing  us.  If  it  were  not  for  this  particular  fact,  many  firms  would  not  consider  it  necessary  to 
keep  books  at  all.  However,  it  would  be  advisable  for  any  business  house  to  keep  an  account  of  all 
transactions  even  though  they  did  an  absolutely  cash  business.  '  Credit  is  absolutely  necessary  in  doing 
modern  business,  and  in  order  to  keep  books  successfully  by  double  entry  it  becomes  necessary  for  us  to  keep 
a  record  of  accounts  other  than  our  personal  accounts.  These  accounts,  such  as  Merchandise,  Cash, 
Expense,  Interest  and  Discount,  Bills  Pay.,  Bills  Rec. ,  Furniture  and  Fixtures  Chattels  etc.,  are 
called  Non- Personal  Accounts. 

DISCOUNTING  NOTES  AT  THE  BANK 

370.  The  term  "face"  is  a  very  common  expression  in  business,  meaning  the  words  of  a  commer- 
cial paper,  but  especially  the  sum  expressed  in  writing  and  figures  exclusive  of  any  interest  or  discount. 

371.  It  frequently  becomes  necessary  for  business  men  to  raise  money  quickly,  and  often  times  to 
do  this  they  take  unmatured  notes  or  other  commercial  paper  to  the  bank  and  have  them  discounted.  If 
these  papers  do  not  draw  sufficient  interest  to  justify  the  banker  in  paying  the  face  value  of  them,  he  will 
deduct  a  certain  amount  and  pay  the  balance  in  cash,  or  if  desired,  he  will  place  the  sum  which  he  allows 
you  to  your  credit.  The  amount  of  money  you  thus  obtain  by  discounting  your  note  is  called  the  Net 
Proceeds. 

372.  The  rate,  or  amount  of  discount  that  the  banker  charges,  depends  upon  the  security  of  the 
paper,  the  amount  involved  and  the  time  yet  remaining  before  payment.  For  example,  if  you  have  a  $500 
note,  without  interest,  due  in  60  days,  and  the  banker  charges  6%  discount,  the  banker  would  deduct  $5 
for  discount  and  hand  you  $495  in  cash,  or  place  it  to  your  credit  as  you  desired.  For  such  a  transaction 
you  would  make  an  entry  as  shown  in  paragraph  138. 

PREPAYING  YOUR  OWN  NOTES 

373.  Sometimes  a  holder  of  a  note  will  advise  the  maker  that  he  will  allow  a  special  discount  for 
payment  before  it  is  due,  and  if  the  discount  allowed  you  is  sufficient  to  make  it  an  object  for  you  to  do  so, 
you  should  always  take  advantage  of  such  opportunities.  In  making  an  entry  for  such  a  transaction  you 
would  debit  Bills  Pay.  for  the  face  of  the  note,  and  credit  cash  for  the  amount  actually  paid  out,  and  credit 
Int.  &  Dis.  for  the  amount  of  the  discount  that  you  are  allowed.     See  page  88. 

NOTES  PAYABLE  AT  THE  BANK 

374.  It  is  not  necessary  to  issue  a  check  for  the  payment  of  a  note  or  draft  that  is  made  payable  at 
the  bank  where  you  have  money  on  deposit,  providing  you  have  notified  the  banker  to  pay  the  note  when 
presented,  as  the  holder  of  such  paper  can  then  get  his  money  by  simply  presenting  the  note  to  the  banker, 
who  will  charge  it  to  your  account  and  return  it  to  you  with  your  checks.  It  is  not  advisable  for  a  banker 
to  do  this,  however,  or  for  you  to  ask  him  to,  as  it  is  liable  to  cause  much  confusion. 

375.  When  your  Pass  Book  is  balanced,  or  when  you  are  notified  by  the  banker  of  such  payment 
of  a  note,  you  should  make  an  entry  in  your  Banking  Ledger  exactly  the  same  as  though  you  had  given 
a  check.     You  would  also  make  the  required  entry  in  your  other  books.  See  page  88. 

376.  Trade  Discount  or  Commercial  Discount  as  it  is  sometimes  called,  is  an  allowance  or  deduc- 
tion made  by  merchants  and  manufacturers  from  the  catalog  or  list  price.  Large  wholesalers  or  jobbers 
distribute  among  their  customers  lists  of  the  merchandise  which  they  have  for  sale.  Such  a  list  sometimes 
assumes  the  proportions  of  a  catalog.     As  prices  vary  from  time  to  time  customers   are  supplied  with 


74 


JOBBING   BUSINESS 


"discount  sheets'*  so  as  to  enable  them  to  determine  the  exact  price  asked  for  the  desired  article.  When 
any  of  these  listed  goods  are  billed  they  are  always  billed  at  the  catalog  or  list  price,  and  the  Commercial 
or  Trade  Discounts  are  deducted  to  obtain  the  Net  Price.  For  example,  if  a  Trade  Discount  of  10  %  was 
allowed  on  a  bill  of  $250,  the  net  amount  paid  would  be  $225.  When  the  rate  of  discount  differed  on  the 
various  items  in  the  bill,  it  is  expressed  in  connection  with  the  item  as  in  the  following  form. 

377.  In  the  first  item  the  fraction  Yi  means  a  discount  of  33^  %.  In  the  second  item  the  fraction 
j{  means  a  discount  of  25%.  In  the  third  item  20  means  20%,  and  the  word  "net"  in  con- 
nection with  the  fourth  item  means  that  no  discount  is  allowed  on  that  item.  Rates  of  discount,  however, 
are  usually  expressed  in  figures,  and  the  second  form  is  the  one  in  more  common  use,  and  the  one  which 
you  will  follow  in  your  school  work. 


M. 


H.    B.    Burton 


Cincinnati,    Ohio,    Nov.    20, 


.190 


9 


Bought  of. 


W.    E.    Devine, 


GENERAL    JOBBER 


TERMS. 
NO 


Net   Cash 


All.  Claims  for  Sbortaok  or  Diuagk  most   be  made:  on  Receipt  of   Goons 


20 


10 


15 


25 


brls.  Cornmeal  1-3 


3.60 


w  Oatmeal  1-4 


9.40 


W,  F.  Flour  20 


5.50 


"  Super 


Net 


4.00 


48 

70 

50 

66 

100 

284 

50 

1 

378.     The  following  bill  is  the  same  in  form  as  the  preceding  one,  except  that  the  discount-rate  on 
each  item  is  entered  after  the  price  of  the  article  instead  of  before  it.     Both  forms  are  in  common  use. 


-jVI  H.   B.   Burton 


Cincinnati,    Ohio,    Jan.    20, 


190_ 


Bought  of. 


C.    Eldridge 


LUMBER    DEALER 


TERMS. 
NO 


On  account 


All.  Olaims  for  Shortage  or  Damage  must   bhj  made  on  Receipt  of   GoOD3j 


30 

M.  Star  Shingles 

1.80 

less  10 

48 

60 

10 

M.  6  n  Clear  " 

1.20 

"    5 

11 

40 

• 

5 

M.  Lath 

1.60 

"   15 

6 

80 

5 

M.  Cedar  Posts 

.06 

300 

366 

80 

j 

JOBBING  BUSINESS 


75 


379.  Sometimes  two  or  more  discounts  are  given  in  succession.  To  illustrate; — a  man  buys  a  bill 
of  goods  subject  to  a  discount  of  10  and  5%.  This  does  not  mean  that  he  will  get  a  discount  of  15%  from 
the  face  of  the  bill,  but  that  a  10%  discount  is  deducted  from  the  face  of  the  bill  and  then  5%  is  deducted 
frOm  the  remaining  amount.  Thus,  if  you  bought  a  bill  for  $200  subject  to  a  discount  of  10  and  5  %  you 
would  first  deduct  the  10%,  $20,  which  would  net  $180.  From  $180  deduct  5%,  $9,  which  would  leave 
the  net  amount  of  the  bill  to  be  paid,  $171.  Sometimes  these  discounts  are  expressed  in  a  series  of  three, 
as  20,  10  and  5%,  or  even  20,  10,  5  &  2%,  although  it  is  seldom  that  the  series  is  composed  of  more  than 
three  discounts. 

380.  For  illustration,  the  following  bill  is  sold,  less  a  series  of  discounts  of  20%,  10%,  and  5%. 
Two  or  more  separate  discounts  are  not  equal  to  their  sum,  as  they  are  computed  upon  a  different  base, 
thus  20%,  10%,  and  5%,  are  not  the  same  as  35%,  but  are  equal  to  31T6ff%.  Taking  these  discounts 
separately,  the  first  discount,  at  the  rate  of  20%  on  $200,  is  $40;  deducting  this  from  the  $200,  leaves  a 
net  amount  of  $160;  the  second  discount,  at  the  rate  of  10%  on  $160,  is  $16;  deducting  this  amount  from 
$160,  leaves  a  net  amount  of  $144;  the  third  discount,  at  the  rate  of  5%  on  $144,  is  $7.20;  deducting 
this  amount  from  the  $144,  leaves  a  net  amount  of  $136.80  to  be  paid;  or,  $200,  less  a  straight  discount 
of  31-/0%,  which  also  leaves  $136.80. 


]y/£  H.    B.    Burton 


Cincinnati,    Ohio,   Nov.    20, 


J-90. 


9 


Bought  of 


L.   D.   Stafford 


TERMS 


GENERAL    JOBBER 

On  accft. ,  less  20,  10,  and  5X 


NO. 


All  Claims  tor  Sboetagk  ok  Dihaoi  must  bej  made  on  Receipt  of  Goods 


10 


10 


20 


brls.  Oatmeal 


9.00 


Cornmeal 


3.00 


Super  Flour 


4.00 


Less  20,  10,  and  5X 


90 


30 


80 


200 


63 


20 


136 


80 


381.  Time  Discount.  Time  Discount  is  a  discount  which  varies  with  the  time  of  payment.  For 
illustration,  the  following  bill  of  merchandise  for  $200  is  sold  on  90  days  credit,  subject  to  immediate  pay- 
ment or  at  any  time  before  the  90  days  have  elapsed  at  the  option  of  the  buyer.  If  this  bill  was  paid  im- 
mediately at  the  time  of  the  purchase,  a  discount  of  20  %  would  be  allowed,  making  the  net  amount  to  be 
paid  $160.  If  paid  any  time  before  the  expiration  of  30  days,  otherwise  than  cash  on  delivery,  a  discount 
of  10%  would  be  allowed,  making  the  net  amount  to  be  paid  $180.  If  paid  any  time  between  30  and  60 
days  a  discount  of  5  %  would  be  allowed,  making  the  net  amount  to  be  paid  $190,  but  if  paid  any  time 
after  the  60  days  no  discount  would  be  allowed  and  the  full  amount  of  the  bill  is  due  and  payable  at  the 
expiration  of  the  90  days  from  date  of  same. 

382.  Sometimes  a  cash  payment  is  made  upon  a  bill  subject  to  a  discount,  but  the  entire  bill  is  not 
paid.  When  this  is  done  the  buyer  should  be  credited  with  an  amount  equal  to  that  which  the  cash  would 
buy,  subject  to  the  conditions  and  discounts  as  written  on  the  bill.  The  amount  for  which  the  buyer 
should  obtain  credit  is  foun'd  by  dividing  the  payment  by  100%  less  the  discount  rate  to  which  he  is 
entitled.  Suppose,  for  illustration,  that  in  the  following  bill  a  payment  of  $150  is  made  at  the  time  of  the 
purchase.  For  a  payment  at  the  time  of  purchase  the  buyer  is  entitled  to  a  discount  of  20%.  Then 
100%  minus  20%  equals  80%.  $150.00  divided  by  80  equals  $187.50,  which  is  the  amount  for  which  the 
buyer  is  entitled  to  credit.     . 


76 


M. 


JOBBING  BUSINESS 

Cincinnati,    Ohio,   Nov.    20, 


.190. 


H.    B.    Burton 


Bought  of. 


L.    D.    Stafford 


TERMS 


GENERAL    JOBBER 

Cash,  20%;  30  days,  10%;  60  days,  5%;  90  days,  Ret. 


NO.. 


All  Claims  for  Shortage  or   Damage  must   hh  made;  on  Kkceipt  of  Goods 


10 


10 


20 


brls.  Oatmeal 


9.00 


Cornmeal 


3.00 


Super  Flour 


4.00 


Cr.  by  Cash,  $150,  dis.  $37.50 


90 


30 


80 


200 


187 


50 


12 


50 


383.  Merchandise  Discount.  It  often  happens  in  purchasing  bills  of  merchandise  that  such  bills 
are  bought  subject  to  a  special  discount  if  paid  within  a  certain  time,  as  "Subject  to  20%  discount  if  paid 
within  15  days,  15%  discount  30  days,  otherwise  net. "  When  such  a  bill  of  merchandise  is  purchased, 
merchandise  is  debited  and  the  seller  is  credited  for  the  face  of  the  bill  without  reference  to  the  discount. 
See  paragraph  131.  Such  a  bill  should  be  paid  within  the  15  days,  even  if  the  buyer  is  compelled  to  go  to 
the  bank  and  borrow  money  to  do  so,  and  when  such  a  bill  is  paid  the  seller  would  be  debited  for  the  full 
amount  of  the  bill,  that  is,  the  amount  for  which  he  was  credited,  Merchandise  Discount  would  be  credited 
for  the  amount  deducted  (the  20%), and  Cash  would  be  credited  for  the  amount  of  money  paid  out.  See 
paragraph  132. 

384.  Net  Cash.  This  term  means  that  a  bill  on  which  the  words  are  written  is  not  subject  to  any 
discount  in  addition  to  those  already  deducted  from  the  face  of  the  bill,  nor  for  any  rebate  charge  or  col- 
lection, nor  to  any  deduction  of  any  kind.  Among  some  wholesalers  or  jobbers,  Net  Cash  implies  a 
credit  of  from  ten  to  thirty  days  if  desired;  but  usually  when  a  bill  is  marked  Net  Cash,  prompt  payment  is 
expected.  The  terms  of  credit  are  generally  clearly  expressed  on  the  face  of  a  bill  if  other  than  immediate 
payment  is  allowed. 

385.  Legal  Rate  of  Interest.  In  most  states  the  law  specifies  an  interest  rate  at  which  interest  is 
to  be  paid  should  no  rate  be  specified  in  the  agreement.  This  rate  is  known  as  the  Legal  Rate  of  Interest, 
and  varies  in  different  states.  When  your  Cabinet  directions  tell  you  to  specify  interest  at  the  legal  rate  you 
should  ascertain  what  that  rate  is  in  your  state.  It  would  be  advisable  at  this  time  to  read  the  chapter  in 
your  Commercial  Law  Book  on  Interest. 


GENERAL   REVIEW  QUESTIONS 


INVOICES 

1.  What    fact    should    an    invoice   set  forth  ? 
The  quantity  and  kind  of  goods  sold,  the  price, 

total  amount  of  each  item,  and  the  discount  allowed, 
if  any  ;  also  the  buyer's  address,  the  date,  terms  of 
the  sale,  and  a  receipt  by  the  seller  01  any  payment 
that  may  have  been  made. 

2.  What  should  be  done  when  an  invoice  is 
received  ? 

It  should  be  compared  with  the  goods,  in  order  to 
see  that  these  agree  in  kind  and  amount  with  those 
received,  the  items  that  are  found  correct  being 
checked  off  on  the  invoice. 

3.  In  making  out  invoices,  what  special  care  is 
required  ? 

That  the  writing  and  figures  are  legible,  that  the 
goods  are  plainly  described,  and  agree  with  the  buy- 
er's order,  that  the  terms  and  discounts  allowed  are 
according  to  agreement,  and  that  discounts,  exten- 
sions, and  totals  are  accurately  and  correctly  com- 
puted. 


EXPENSE   ACCOUNT 

4-    What  is  the  purpose  of  the  Expense  account? 

To  show  the  amounts  expended  for  ordinary  run- 
ning expenses  in  conducting  a  business. 

5.  Which  side  of  this  account  shows  the  outlays 
for  expense  ? 

The  debit  side. 

6.  What  does  the  credit  side  show  ? 

As  a  rule  the  credit  side  is  blank,  but  if  we  were 
to  sell  any  property  that  had  been  originally  charged 
to  Expense  when  purchased,  the  sale  would  be  en- 
tered on  the  credit  side  of  the  Expense  account. 
Thus,  a  quantity  of  coal  might  have  been  purchased 
for  fuel  and  charged  to  the  Expense  account,  and 
afterward  it  might  be  found  advisable  to  sell  a  por- 
tion of  it.  In  this  case  whatever  is  received  for  the 
coal  should  be  debited,  and  the  Expense  account 
credited. 


LOSS  AND  GAIN  ACCOUNTS 

7.  What  accounts  are  classified  as  ' '  loss  and 
gain  accounts  "  f 

Those  accounts  which  show  either  a  loss  or  a  gain, 
as  the  Merchandise  account,  the  Expense  account, 
or  the  Interest  and  Discount  account,   etc. 

8.  Into  what  general  account  are  the  various  loss 
and  gain  accounts  closed? 

Into  the  Loss  and  Gain  account. 

9.  This  account  is  finally  closed  into  what  ac- 
count ? 

Into  the  proprietor's  Stock  account. 


To  exhibit  the  proprietor's  investments  and  with- 
drawals, and  his  net  gains  or  losses  during  any 
period  of  the  business. 

11.  What  does  the  credit  side  of  this  account 
show  ? 

The  investment  and  the  gains. 

12.  What  does  the  debit  side  show  ? 
The  withdrawals  and  the  losses. 

13.  If  the  credit  side  is  the  larger,  what  will  the 
difference  show  ? 

The  proprietor's  present  worth. 

lit.  If  the  debit  side  is  the  larger,  what  does  the 
balance  of  the  account  show  ? 
The  proprietor's  insolvency. 
15.    When  shoidd  this  account  be  closed  ? 
Whenever  the  books  are  closed. 


PROPRIETOR'S  STOCK  ACCOUNT 

10.    What  is   the   purpose   of   the  proprietor's 
Stock  account  ? 


BALANCES 

16.  What  is  meant  by  the  balance  of  an  account  ? 
The  difference  between  the  respective  sums  of  the 

debit  and  credit  sides. 

17.  What  is  meant  by  the  resources  of  a  busi- 
ness ? 

All  property  belonging  to  the  business  and  all 
debts  owed  to  it. 

18.  What  are  liabilities  ? 

All  debts,  of  whatever  character,  owed  by  the 
proprietor  of  the  business  to  other  persons. 

19.  When  does  the  balance  of  an  account  repre- 
sent a  resource  ? 

When  it  represents  property  belonging  to  the  busi- 
ness, or  a  debt  that  is  owed  to  the  proprietor. 

20.  If  the  debit  side  of  an  account  is  greater 
than  the  credit  side,  what  does  the  balance  of  the 
account  show  ? 

Either  a  resource  or  a  loss. 

21.  If  the  credit  side  of  an  account  is  greater 
than  the  debit  side,  what  does  the  balance  show? 

Either  a  liability  or  a  gain. 

22.  When  does  a  personal  account  show  a  re- 
source ? 

When  the  debit  side  is  greater  than  the  credit 
side. 

23.  When  does  a  personal  account  show  a  lia- 
bility ? 

When  the  credit  side  is  greater  than  the  debit 
side. 

2Jf.    What  is  meant  by  the  net  capital  of  a  firm  ? 

The  excess  of  the  resources  over  the  liabilities. 

25.  If  the  resources  of  a  firm  are  S  10,000  and 
the  liabilities  $lf,000,  what  is  the  net  capital? 

$6,000. 

26.  What  is  meant  by  the  insolvency  of  a  firm? 
The  excess  of  the  liabilities  over  the  resources. 

[77] 


78 


GENERAL  REVIEW  QUESTIONS 


27.  If  the  resources  of  a  firm  are  $7,000  and  the 
liabilities  $1 1,000,  what  is  the  amount  of  the  in- 
solvency ? 

$4,000.  

TRIAL   BALANCE 

28.  What  is  the  purpose  of  a  trial  balance  ? 

To  test  the  accuracy  of  the  accountant's  records 
m  the  Journal  and  the  Ledger. 

29.  Is  the  correctness  of  the  Trial  Balance  ab- 
solute proof  that  the  ledger  amounts  are  correct  ? 

It  is  not.     It  is  merely  one  evidence  to  that  effect. 

30.  What  does  the  Trial  Balance  realhj  prove  ? 
If   correct,   it  proves  that  the  total  sum  of   the 

debits  in  the  Ledger  is  equal  to  the  total  sum  of  the 
credits. 

31.  W hat  is  necessary  in  order  that  the  Ledger 
may  be  in  balance  ? 

The  debits  and  credits  of  the  original  entries  must 
have  been  equal,  and  all  of  these  must  have  been 
posted  correctly  to  the  Ledger. 

32.  If,  in  posting,  a  credit  item  were  omitted, 
what  woidd  be  the  effect  upon  the  Trial  Balance  ? 

The  credit  side  of  the  Trial  Balance  would  be  too 
small. 

33.  What  would  be  the  effect  upon  the  Trial  Bal- 
ance of  posting  a  debit  amouiif,  twice  f 

The  debit  side  of  the  Trial  Balance  would  be  too 
large. 

3 If.  If  a  debit  item  of  $100  shoidd  be  posted  to 
the  credit  side  of  the  Ledger,  lohat  woidd  be  the  ef- 
fect upon  the  Trial  Balance  f 

There  would  be  a  difference  of  $200  between  the 
debit  and  credit  footings. 

35.  In  case  the  two  sides  of  the  Trial  Balance 
do  not  agree,  ichat  is  the  first  step  to  take  ? 

To  ascertain  the  exact  amount  of  the  discrepancy, 
and  then  examine  your  books  of  original  entry  to 
see  if  there  is  an  entry  for  that  amount,  which  may 
have  been  omitted  in  the  posting. 

36.  If  nothing  of  this  character  is  found,  what 
is  the  next  step  ? 

To  see  if  there  is  an  amount  equal  to  one  half  of 
the  cliscrepanc}'  in  the  Trial  Balance,  which  may  have 
been  posted  to  the  wrong  side  of  the  Ledger  ;  thus, 
if  the  discrepancy  in  the  Trial  Balance  is  $560,  it 
might  be  explained  by  the  fact  that  an  amount  of 
$280  had  been  posted  to  the  wrong  side  of  the 
Ledger. 

37.  If  such  an  amount  is  not  found,  what  is  the 
next  step  f 

To  examine  the  Ledger  carefully,  in  order  to  see 
that  there  have  been  no  errors  in  copying  the  foot- 
ings of  the  Ledger  into  the  Trial  Balance. 

38.  If  you  still  fail  to  find  the  error,  what 
shoidd  be  the  next  procedure? 

To  go  over  carefully  all  of  the  additions  in  the 
Ledger. 

89.   If  these  are  found  correct,  what  next  f 
Examine  the  journal  entries,  and  see  if  the  debits 
and  credits  are  equal. 


JfO.  If  still  no  error  is  found,  what  is  the  next 
step  ? 

To  check  off  the  postings  to  the  Ledger. 

Jfl.    What  is  meant  by  thidf 

It  means  to  review  the  posting  of  each  amount, 
entering  a  light  check  mark  with  lead-pencil  in  the 
Ledger,  opposite  each  amount  that  is  correctly 
posted.     It  is  not  necessary  to  check  the  Journal. 

42.  If  the  error  is  still  undiscovered,  to  hat  are 
we  to  conclude  f 

Either  that  we  have  made  a  mistake  in  some  of 
the  steps  taken  to  ascertain  the  errdr,  or  else  that 
there  is  an  error  in  our  last  balance  of  balances, 
through  which  the  books  were  out  of  balance  at 
the  beginning  of  the  business. 


MISCELLANEOUS 

43.  What  is  meant  by  the  ex%>lanation  of  an 
entry  ? 

A  statement  setting  forth  plainly  the  details  of 
the  transaction. 

44-  What  is  the  necessity  for  making  an  expla- 
nation full  and  complete  ? 

To  enable  any  one  who  might  be  called  upon  to 
take  charge  of  the  books,  to  understand  clearly  the 
details  of  every  transaction  in  connection  with  the 
business. 

45.  Is  the  form  in  which  an  explanation  is  en- 
tered important  f 

It  is  not.  All  that  is  necessary  is  to  write  just 
what  occurred,  and  in  such  a  way  that  any  one  could 
get  a  clear  idea  of  the  transaction. 

46.  What  is  meant  by  an  indebtedness  ((on  ac- 
count "  ? 

Any  indebtedness  that  is  not  based  upon  the  debt- 
or's note  or  other  promissory  obligation. 

47.  What  is  meant  by  jwsting  ? 

Posting  is  transferring  the  debit  and  credit  amounts 
from  the  books  of  original  entry  to  their  respective 
accounts- in  the  Ledger. 

48     What  is  an  opening  entry  ? 

It  is  a  preliminary  entry  setting  forth  the  charac- 
ter and  conditions  of  the  business,  and  including  an 
exhibit  of  the  various  resources  and  liabilities  on 
commencing  the  business. 

49.  Under  what  circumstances  shoidd  the  amounts 
of  the  opening  entry  not  be  posted  to  the  Ledger  ? 

When  they  are  included  in  accounts  that  are  al- 
ready in  the  Ledger  when  the  business  is  commenced. 

50.  At  lohat  time  should  the  folio  pages  be  en- 
tered  in  connection  with  the  posting  f 

Immediately  after  the  amount  has  been  entered  in 
the  Ledger. 

51.  When  goods  are  sold  on  account,  why  should 
the  sale  be  itemized  on  the  books  f 

In  order  that  the  seller  may  have  a  complete  his- 
tory of  the  transaction,  in  the  event  that  the  buyer 
disputes  the  account. 

52.  State  the  purpose  of  receipts. 

The  purpose  of  a  receipt  is  to  supply  formal  and 
reliable  evidence  that  money  has  been  paid,  or  that 
property  has  been  delivered. 


GENERAL  REVIEW  QUESTIONS 


79 


58.    W  hen  should  you  exact  a  receipt  f 
Whenever  money  is  paid,   and  when  property  is 

delivered,   without  a  formal  record  being  made  of 

such  delivery. 

51/..   Is  a  certified  check  negotiable  ? 
It  is. 

55.    What  is   meant    by    the    "legal   rate"   of 
interest  ? 

The  rate  that  is  prescribed  by  law  for  cases  where 
interest  is  to  be  paid,  but  no  rate  has  been  agreed 
upon.  The  legal  rate  varies  in  the  different  States, 
but  it  is  usually  lower  than  the  current  rate  charged 
by  the  banks. 


EXERCISES  IN  JOURNALIZING 

1.  Bought  of  Harmon  <£•  Sons  on  account,  five 
tons  of  coal  for  use  in  the  store.      What  entry  ? 

Expense  to  Harmon  &  Sons. 

2.  Deciding  that  more  coal  had  been  bought  for 
the  tise  of  the  store  than  would  be  needed,  ice  sold 
one  ton  of  the  same  for  cash.      What  entry  ? 

Cash  to  Expense. 

8.  Gave  Joseph  Brown  a  check  in  payment  of 
my  note  in  his  favor  for  $150  with  interest  on  the 
same  $12.  W hat  accounts  are  affected  in  this 
transaction  ? 

Bills  Payable,  Interest  and  Discount,  and  Cash. 

If.   How  are  these  accounts  affected,  and  why  t 
Bills  Payable  is  debited  because  our  note  is  re- 
ceived ;  Interest  and  Discount  is  debited  because  it 
costs  us  value  ;  and  Cash  is  credited  because  cash  is 
parted  with. 

5.  Henry  Smith  gave  us  a  check  hi  payment  of 
his  note  in  our  favor  for  $75,  interest  on  the  same 
$6.      W hat  accounts  are  affected  ? 

Bills  Receivable,  Interest  and  Discount,  and  Cash. 

6.  How  are  these  accounts  affected,  and  why  ? 

Cash  is  debited  because  it  is  received  ;  Bills  Re- 
ceivable is  credited  because  we  have  parted  with  a 
bill  receivable  ;  Interest  and  Discount  is  credited  be- 
cause it  has  yielded  us  value. 

7.  Paid  our  note  without  interest,  giving  a  check 
for  one  half  of  the  face,  and  mdse  for  the  balance. 

What  entry  f 
Bills  Payable  to  Cash  and  Mdse. 

8.  Give  the  form  of  entry  required  for  the  fol- 
lowing transactions  : 

9.  Sold  mdse  to  R.  Miller,  receiving  in  payment 
a  certified  check. 

Cash  to  Mdse. 

10.  C.  W.  Jones  settled  his  account  by  giving  us 
his  note  at  thirty  days. 

Bills  Receivable  to  C.  W.  Jones. 

11.  Accepted  Hart  &  Co.'s  draft  on  us  at  ten 
days1  sight. 

Hart  &  Co.  to  Bills  Payable. 

12.  R.  J.  Miller  gave  us  a  check  in  payment  of 
his  note  vdth  interest. 

Cash  to  Bills  Receivable  and  Interest  and  Discount. 


18.    Settled  our  account  with  Stephens  <b  Bros., 
giving  them  our  note  at  thirty  days. 
Stephens  &  Bros,  to  Bills  Payable. 

llf..  Sold  T.   S.  Brown  a  bill  of  mdse,   taking  in 
payment  his  acceptance  at  five  days. 
Bills  Receivable  to  Mdse. 

15.  Martin  &  Go.  accepted  our  draft  on  them  at 
ten  days,  on  account. 

Bills  Receivable  to  Martin  &  Co. 

16.  Bought  of  Peters  &  Snow  a  bill  of  mdse  , 
giving  in  payment  our  acceptance  at  five  days. 

Mdse.  to  Bills  Payable. 

17.  Sold  C.  W.  Gook  a  bill  of  mdse  ,  receiving 
in  payment  cash  and  our  acceptance  in  favor  of 
Jones  &  Go. 

Bills  Payable  and  Cash  to  Mdse. 

18.  Sold  Walker  &  Sons  a  bill  of  mdse  ,  the 
amount  to  be  indorsed  on  our  note  in  their  favor. 

Bills  Payable  to  Mdse. 

19.  Gave  J.  M.  Day  our  check  in  payment  of  our 
note  in  their  favor,  with  interest. 

Bills  Payable  and  Interest  and  Discount  to  Cash. 

20.  Bought  a  bill  of  mdse  of  C.  IT.  Stone,  giving 
in  payment  our  draft  on  John  Henderson. 

Mdse.  to  John  Henderson. 

21.  Gave  our  clerk  as  a  portion  of  his  salary  our 
order  on  Miller  &  Go. 

Expense  to  Miller  &  Co. 

22.  Sold  mdse  to  R.  Davis  for  his  acceptance 
at  five  days. 

Bills  Receivable  to  Mdse. 

23.  Gook  &  Go. ,  whom  we  owe  on  account,  have 
drawn  on  us  at  ten  days,  and  we  have  accepted  the 
draft. 

Cook  &  Co.  to  Bills  Payable. 

24-  Bought  mdse    of    Wilson    &  Bros.,  giving 
in  payment  our  order  on   G.    W.  Gook. 
Mdse  to  C.  W.  Cook. 

25.  Gave  J.  W.  White  a  check  in  payment  of  his 
bill  for  expert  work  on  our  books. 

Expense  to  Cash. 

26.  Bought  of  Walker  tb  Day  on  account,  one 
brl.  of  oil  for  use  in  our  store. 

Expense  to  Walker  &  Day. 

27.  Sold  ten  gals,  of  the  oil  referred  to  in  the  last 
transaction  to   George  Moore  on  account. 

George  Moore  to  Expense. 

28.  Sold  Ghas.  Wilson  a  bill  of  mdse  the  same 
to  be  applied  as  part  p>ayment  of  interest  due  on 
our  note  in   his  favor. 

Interest  and  Discount  to  Mdse. 

29.  Paid  our  note  in  favor  of  R.  S.  Harper 
with  interest  on  thi  same,  giving  our  draft  on  King- 
man &  Go. 

Bills  Payable,  and  Interest  and  Discount  to 
Kingman  &  Co. 

30.  Bought  mdse  of  Henderson  &  Go. ,  paying 
cash  for  a  part  of  the  purchase,  and  our  note,  at 
thirty  days,  for  the  balance. 

Mdse  to  Cash  and  Bills  Payable. 


80  JOBBING  BUSINESS 

CASH  BOOK 

386.  The  Cash  Book  is  a  separate  book  in  which  no  other  but  the  Cash  account  is  kept. 
(Many  houses  keep  two  Cash  Books,  a  Main  or  General  Cash  Book,  and  a  Petty  Cash  Book,  in 

the  ordinary  or  common  form,  or  as  an  Imprest  Petty  Cash  Book.  The  Petty  books  will  be  explained 
later.) 

The  General  Cash  Book  for  Double  Entry  generally  has  two  or  more  money  columns  on  each 
page,  and  two  pages  are  used  to  record  all  transactions  involving  cash.  The  left-hand  page  is  used 
as  the  debit  side  of  the  Cash  account  and  contains  a  record  of  all  cash  received.  The  right-hand  page 
is  used  as  the  credit  side  of  the  Cash  account  and  contains  a  record  of  all  cash  paid  out. 

What  is  Cash  in  bookkeeping?  In  general,  a  bookkeeper  would  be  safe  in  accepting  gold  coins, 
silver  coins,  nickels,  copper  coins,  gold  certificates,  silver  certificates,  greenbacks,  National  bank  notes, 
personal  checks  from  his  customers,  but  not  from  strangers,  personal  checks  certified,  cashier's  checks,  bank 
drafts,  bills  of  exchange,  postoffice  money  orders,  express  money  orders,  telegraph  money  orders,  and 
letters  of  credit,  as  cash. 

The  illustration  on  pages  82  and  83  shows  a  Cash  Book  with  two  money  columns  on  each  page. 

The  method  of  making  entries  in,  and  the  posting  from,  the  Cash  Book,  will  depend  on  how  the 
columns  are  used.       Three  of  these  ways  are  explained  under  A,  B,  and  C. 

A.  If  the  left-hand  money  column  is  used  for  Items  and  the  right-hand  money  column  for  Totals, 
then,  since  the  left-hand  page  is  the  debit  side, 

387.  To  record  the  name  of  an  account  on  the  left-hand  page  debits  cash  and  credits  the  account. 
This  will  be  made  clear  if  the  first  sale  of  Mdse  to  O.  C.  Dailey,  for  cash,  is  journalized.     The 

Journal  entry  would  be  Cash  to  Mdse  $826.40.  Par.  15.  From  this  entry  it  will  be  seen  that  the 
Mdse  item  would  post  to  the  credit  of  Mdse  account.  Using  the  columns  in  this  way  the  rule,  then, 
is:  Post  all  accounts  on  the  left-hand  page  of  the  Cash  Book  to  the  credit  side  of  their  respective  accounts 
in  the  Ledger. 

Since  the  right-hand  page  is  the  credit  side, 

388.  To  record  the  name  of  an  account  on  the  right-hand  page  credits  Cash  and  debits  the  account. 
This  will  be  made  clear  if  the  first  entry  on  the  right-hand  page  of  the  Cash  Book  is  journalized. 

The  Journal  entry  would  be  Expense  to  Cash,  $200.  Par.  15.  From  this  entry  it  will  be  seen  that 
the  Expense  item  would  post  to  the  debit  of  Expense.  Then,  the  rule  is:  Post  all  accounts  on  the 
right-hand  page  of  the  Cash  Book  to  the  debit  of  their  respective  accounts  in  the  Ledger. 

389.  As  the  Cash  Book  is  the  Cash  account,  when  a  Cash  Book  is  used  it  is  not  necessary  to 
carry  a  Cash  Account  in  the  Ledger.  Some,  however,  carry  the  cash  Balance  each  month  to  the 
Ledger.  Others  carry  monthly  debit  and  credit  footings  to  the  Ledger,  preparatory  for  Trial  Balance. 
Perhaps  most  bookkeepers  do  not  carry  Cash  account  in  any  form  in  the  Ledger,  but  take  the  monthly 
Balance  or  debit  and  credit  footings  directly  from  the  Cash  Book  to  the  Trial  Balance. 

390.  In  actual  business  the  Cash  Book  is  footed  in  pencil  and  the  cash  account  verified  each 
day,  as  directed  in  "Testing  Cash"  and  the  "Daily  Cash  Balance  Book,"  elsewhere  in  this  book  (or 
some  similar  plan  is  used),  and  the  Cash  Book  is  balanced  and  ruled  up  only  at  the  end  of  the  month. 

391.  However,  in  your  schoolwork,  for  practise,  you  should  verify,  balance,  and  rule  up  your 
Cash  Book  every  day,  in  accordance  with  the  Cash  Book  illustrations  in  this  book. 

392.  In  transferring  the  Cash  Account  from  the  Ledger  to  the  Cash  Book,  you  should  enter  on 
the  credit  side  of  the  Cash  account  in  the  Ledger,  in  red  ink,  "Balance  to  Cash  Book  page  — ," 
and  the  amount.  Then  double  rule  the  account  and  on  the  left-hand  page  of  your  Cash  Book  write 
the  words  "Balance  from  Ledger,  page  — ,"  and  the  amount.     See  pages  82,  83. 

BILLS  RECEIVABLE,  BILLS  PAYABLE,  INTEREST,  AND  DISCOUNT 

Interest  is  Cash  allowed  for  the  use  of  money. 

Discount  is  an  amount  deducted  from  a  debt  that  is  due  or  that  may  become  due  at  some 
future  time. 

393.  If  you  receive  Cash  for  a  Bills  Receivable  or  for  any  part  of  the  note,  enter  Bills  Receiv- 
able and  the  amount  on  the  left-hand  page,  par.  15.  If  you  receive  cash  for  interest,  enter  Int.  and 
Dis.  and  the  amount  on  the  left-hand  page,  par.  15. 

394.  If  you  pay  a  Bills  Payable,  or  any  part  of  your  note,  enter  Bills  Payable,  and  the  amount 
on  the  right-hand  page,  par.  15.  If  you  pay  cash  for  interest,  enter  Int.  and  Dis.  and  the  amount  on 
the  right-hand  page,  par.  15. 


JOBBING  BUSINESS  81 

395.  Both  interest  and  discount  are  treated  as  losses  or  gains,  and  are  generally  entered  under 
an  account  called  Int.  and  Dis. 

396.  If  you  allow  a  discount,  enter  the  name  and  the  full  amount  of  the  account  on  the  left- 
hand  page,  par.  15.  Then,  enter  Int.  and  Dis.  and  the  amount  of  the  discount  on  the  right-hand 
page,  par.  15.  If  you  are  allowed  a  discount,  enter  the  name  and  the  full  amount  of  the  account 
on  the  right-hand  page,  par.  15.  Then,  enter  Int.  and  Dis.  and  the  amount  of  the  discount,  on  the 
left-hand  page,  par.  15. 

397.  No  entry  should  be  made  for  the  interest  on  interest-bearing  notes  at  the  time  of  receiving 
them,  or  giving  them,  unless  it  should  be  for  accrued  interest  to  date.  In  such  case  the  entry  would 
be  made  for  the  accrued  interest  only ;  that  is,  for  the  amount  of  interest  due  at  the  time  you  receive 
or  give  the  interest-bearing  paper. 

MDSE  DIS.  ON  INVOICES  AND  SALES 

If  you  pay  an  invoice  before  the  discount  period  expires  (1)  make  out  your  check  for  the  amount 
of  the  invoice  less  the  discount,  and  enter  the  name  of  the  firm  and  the  full  amount  of  the  invoice 
on  the  right-hand  page,  par.  15;  (2)  then,  enter  Mdse  Dis.  and  the  amount  of  the  discount  on  the  left- 
hand  page,  par.  15.  If  a  customer  pays  you  before  the  discount  period  expires,  (1)  enter  his  name  and 
full  amount  of  the  bill  on  the  left-hand  page,  par.  15 ;  (2)  then  enter  Mdse  Dis.  and  the  amount  of  the 
discount  on  the  right-hand  page,  par.    15 . 

B.  If  the  left-hand  money  column  on  the  left-hand  page  is  used  to  record  Mdse  Sales,  and  the  right- 
hand  money  column  on  the  same  page,  to  record  sundries  (accounts  that  are  to  be  posted  daily),  and  the 
left-hand  money  column  on  the  right-hand  page  to  record  Expense  items,  and  the  right-hand  money 
column  on  the  same  page  to  record  Sundries  (accounts  to  be  posted  daily);  then,  the  several  amounts 
in  the  Sundries  column  on  the  left-hand  page  would  be  posted  daily  to  the  credit  of  their  respective 
accounts  in  the  Ledger,  and  the  total  of  the  Mdse  Sales  column  would  be  posted  to  the  credit  of  Mdse 
at  the  end  of  the  month;  and  the  several  amounts  in  the  Sundries  column  on  the  right-hand  page  would 
be  posted  daily  to  the  debit  of  their  respective  accounts  in  the  Ledger,  and  the  total  of  the  Expense  column 
would  be  posted  to  the  debit  of  Expense  at  the  end  of  the  month.  Instead  of  Expense,  Mdse  Pur- 
chases may  be  used. 

C.  If  the  right-hand  money  column  on  the  left-hand  page  is  used  to  record  the  amount  of  cash 
actually  received,  and  the  left-hand  money  column  on  the  same  page  to  record  the  amount  of  Mdse 
Dis.,  or  vice  versa,  then  when  a  customer  pays  us  in  time  to  get  advantage  of  the  time  discount,  enter 
his  name  and  the  amount  of  money  received  in  the  right-hand  money  column  and  the  amount  of  Mdse 
Dis.  in  the  left-hand  money  column,  on  the  left-hand  page.  Post  from  the  left-hand  page  the  amount 
of  Cash  plus  the  Mdse  Dis.  to  the  credit  of  the  customer's  account.  Post  the  total  of  the  Mdse  Dis. 
column  on  the  left-hand  page  at  the  end  of  the  month  to  the  debit  of  the  Mdse  Dis.  account. 

If  the  right-hand  money  column  on  the  right-hand  page  is  used  to  record  the  amount  of  cash  paid 
and  the  left-hand  money  column,  on  the  same  page,  to  record  the  amount  of  Mdse  Dis.,  or  vice  versa,  then 
when  we  pay  a  creditor  in  time  to  get  advantage  of  the  time  discount,  enter  the  creditor's  name  and  the 
amount  of  cash  paid  in  the  right-hand  money  column  and  the  amount  of  Mdse  Dis.  in  the  left-hand 
money  column  on  the  right-hand  page.  Post  from  the  right-hand  page,  the  amount  of  the  cash  plus  the 
amount  of  the  Mdse  Dis.  to  the  debit  of  the  creditor's  account.  Post  the  total  of  the  Mdse  Dis. 
column  on  the  right-hand  page,  at  the  end  of  the  month,  to  the  credit  of  the  Mdse  Dis.  account. 

Instead  of  Mdse  Dis.  or  Mdse  Sales,  on  the  left-hand  page,  and  of  Mdse  Dis.  or  Expense  on  the  right- 
hand  page,  any  other  account  occurring  more  frequently  should  be  substituted.  The  naming  of  the  columns 
will,  of  course,  depend  on  the  nature  of  the  business. 

The  columns  of  a  two-column  Cash  Book  may  be  used  in  any  way  the  teacher  may  prefer,  but  it 
is  suggested  that  they  be  used  in  at  least  as  many  different  ways  as  suggested  herein. 

From  the  advantages  in  the  saving  of  entries  and  postings  by  using  the  columns  of  a  two-column 
Cash  Book  in  different  ways,  the  learner  will  understand  that  by  the  use  of  an  extensively  columned 
Cash  Book,  there  will  remain  little,  if  any,  use  fo-  a  Journal,  and  many  business  houses  do  not  use<a 
Journal. 

TESTING   CASH 

To  test  your  cash  account,  take  your  pass  book,  and  all  currency,  checks,  and  drafts  on  hand  to  the 
bank,  and  deposit  your  cash  in  the  bank.  Leave  your  pass  book  at  the  bank  to  be  balanced.  Later 
call  for  your  pass  book,  and  your  canceled  checks. 

When  your  canceled  checks  are  returned  to  you,  arrange  them  in  consecutive  order,  according  to  the 
numbers  of  the  checks  in  the  Banking  Ledger  or  on  the  stub  of  Check  Book.  Then  by  comparing  the 
Banking  Ledger  or  stub  of  Check  Book  with  the  returned  checks,  you  can  determine  the  checks,  if  any, 
and  the  amount  of  the  checks  that  you  have  given  out,  but  which  have  not  been  returned  to  the  bank 
for  payment.  Thus:  Suppose  the  Banking  Ledger  or  stub  of  Check  Book  should  show  that  checks  to 
the  amount  of  $200  have  been  issued,  but  not  returned  to  the  bank  for  payment.  Then,  if  your  Bank- 
ing Ledger  or  stub  of  Check  Book  shows  that  you  should  have  only  $300  in  the  bank,  but  your  pass 
book  shows  that  you  have  $500  to  your  credit,  the  $200  in  checks  that  you  have  issued,  but  which  have 
not  been  returned  to  the  bank,  but  are  still  outstanding,  will  account  for  the  difference  between  your 
Banking  Ledger  or  stub  of  Check  Book  and  the  account  as  shown  by  your  pass  book.  Make  a  record 
of  the  checks  outstanding,  for  future  reference. 

This  test  will  determine  whether  your  cash  account  at  bank  is  correct. 

If  cash  account  is  off,  (1)  go  over  your  checks  and  see  that  each  cash  payment  agrees  with  its  can- 
celed check;  (2)  compare  total  cash  payment  as  shown  by  the  cash  book  with  total  checks  issued ;  (3) 
compare  total  cash  payment  as  shown  by  pass  book  with  total  canceled  checks;  (4)  compare  each  deposit 
in  Banking  Ledger  or  on  stub  of  check  book  with  each  deposit  to  bank  in  pass  book ;  (5)  compare  total 
deposits  on  Banking  Ledger  or  on  stub  of  check  book  with  total  deposits  on  pass  book;  (6)  compare 
total  receipts  of  cash  with  total  deposits  in  pass  book. 

By  following  these  directions  you  will  find  your  difference. 


82 


Date 


Name  of  Account 


JOBBING  BUSINESS 

CASH 

Explanation 


r>R. 


Item  Column 

*  ■  ■    ■ 


Total  Column 


19 

Jan. 

2 

224 

2 

Mdse 

2 

J.  P.  Lawley 

2 

Bills  Receivable 

2 

Mdse 

2 

Harvey  Brown 

2 

Mdse 

Bal.  from  Ledger 

Sale  to  O.  C.  Dailey  Ck. 
On  acct.                    P.  O.  O. 

Reg.  No.  42  Ck. 

Sale  to  Gen.  Mdse  Co.  Ck. 

Acct.  in  full  Cy. 

Sales  for  the  day  Cy. 


8   2    6  40 

1  6 

I    7    5 

4    2     7  62 

2  9  15 

3   i    2  40 


2  7    6   80 


2  7  8   6   57 


Balance 

1    1  0  6 

1 

3   37 

Jan. , 

3 

6   3  4 

2   02 

3 

Mdse 

Sale  to  T.  B.  Hix 

Ck. 

8    2 

0 

3 

Ship.No.  3  U.S.  Com.  Co. 

Part  of  Net  Proceeds 

Ck. 

1  4 

6    50 

3 

O.  B.  Sprague 

On  acct. 

Ck. 

3  9 

3    25 

3 

Mdse 

Sale  to  A.  B.  Fox 

Ck. 

7  6 

5 

3 

Ship.No.  3  U.S.  Com.  Co. 

Balance  due 

Ck. 

1   4 

5 

3 

Bills  Receivable 

Reg.  No.  14 

Ck. 

3  4 

0 

3 

Int.  and  Dis. 

6%  on  No.  14  for  6  mos 

Ck. 

1 

0   20 

3 

Fur.  and  Fix. 

Sold  Courter 

Cy. 

3 

6 

3 

Chattels 

Sold  Horse  and  Wagon 

Dft. 

2  7 

5 

3 

R.  B.  Munn 

Acct.  in  full 

Ck. 

5  5 

2   30 

3 

Mdse 

Sales  for  the  day 
Balance 

Cy. 

_ _____ 

8  5 

0 

4-|3  3 

3    25 

10 

6  7 

5    27 

Jan. 

4 

7 

0  2 

5    12 

4 

E.  M.  Ross 

On  acct. 

Ck. 

3  9 

8 

4 

Expense 

Rebate  on  Rent 

Ck. 

2 

5 

4 

Mdse 

Sales  for  the  day 

Cy. 

3  4 

3    95 

7  6 

6   95 

. 

7 

7  9   2  07 

■ 

Date 


Name  of  Account 


JOBBING  BUSINESS 

CASH 

Explanation 


83 


OR. 


Item  Column 


Total  Column 


19 

Jan.    2 

Expense 

2 

Mdse 

2 

Henry  Scott 

2 

Mdse 

2 

W.  H.  Martin 

2 

Mdse 

2 

D.  W.  Gordon 

2 

E.  O.  Piper 

2 

Mdse 

2 

R.  D.  Lewis 

2 

Bills  Pay. 

2 

Int.  and  Dis. 

2 

Jan.     3 

Mdse 

3 

Chattels 

3 

Expense 

3 

Mdse 

3 

L.  M.  Dexter 

3 

Mdse 

5 

J 

Jan. 


One  month's  Rent     Ck.  42 

Invoice  No.  37  43 

On  acct.  44 

Inv.  No.  38  45 

On  acct.  .                46 

Inv.  No.  45  47 

On  acct.  48 

Acct.  in  full  49 

Inv.  No.  42  50 

On  acct.  51 

Reg.  No.  42.  52 

6%  Bill  42  for  18  ds.  Cy. 
Balance 


Inv.  No.  57 

53 

Horse  and  Wagon 

54 

One  Ton  Hay    ' 

55 

Inv.  No.  58 

56 

On  acct. 

57 

Inv.  No.  61 

58 

Balance  in  Bank 

Balance  in  Cash  Drawer 

4 

Mdse 

Inv.  No.  73 

59 

4 

Bills  Pay 

To  apply  Reg.  No.  39 

60 

4 

Freight 

On  Inv.  No.  69 

Cy. 

4 

Mdse 

Inv.  No.  75 

61 

4 

Expense 

Two  Tons  Coal 

62 

4 

H.  B.  Burton,  Private 

For  Private  use 

63 

4 

Expense 

Water  Tax 

64 

4 

Balance  Fwd. 

84 


200 

6  7  8  20 
2  6  20 
1    8   86 

442 

6  6   5   50 

100 
5  o 

3  8  o  40 

5  5   o 
5  9   2   42 

1    7    77 


4  7  2    1    35 
6  I?  4  2  02 


I 


1   1  b  6   3   37 


2  o  o   15 
225 
8 

067 

2  o 

1  3  o 

6  2   2   82 

4  o  2  30 


3  6  5   o   15 
7  o  2  5  12 


1  o  6   7   5   27 


7  6  4   88 

6  9  7   25 

1  o   80 

1  1  8   50 

9   50 
I  1   o 
6   20 


o  1    7   13 
7  7  4  94 


7  9  2  07 


64 


JOBBING  BUSINESS 


On 

H 


w 
Q 

W~ 
o 
o 

PQ 

W 
o 

PQ 
W 

< 
o 

1-3 
< 


12 

Balance 

on 

Hand 

t-.   :::::::::         : 
o  :::::::::         : 

^    .:::;.:::::::::          : 

oo 

o   :;::;::::::::::        : 

11 

Balance 

in 

Bank 

a  :::::::::::::::        : 

(N   :.:::::::::::::         : 

Tt<  :::::::::'.:::::        : 
io  :::::•:::::::..:        : 

s  * 

n 

JQ 

o>    8 

s 

o»  ;  .      :                                           :                 •         •         •         •         •         1         :        : 
as   :::::::::-..... 

-*:::•       1         .:::::.::::        : 

oo :••••: 

r~ '    ;            I            '.           !            '            I           1            '•           '•            '            •           •            • 

(a 

cD    ::::::::          :                                                :                   : 
CD   :::::::::::::::         : 

1269 

8 

Balance 

in 
Drawer 

oo  :         :         :         :                                             :         :                  :         :         ■         :         : 
«::::::::                ::..:::        : 

co   ■:::::::..:::::          : 
io  :::::::::::::::        : 

7 

Less 

Cash 

Credit 

Tickets 

o   :::::■:•          :                                      :         .          :          : 
o   :::::::::::::■:         •' 

10   •::::':::::::::         : 

6 

Total 

in 

Drawer 

oo    :::::::          :                   : 

co   :::::::::::::::         : 

oo    :.:;::.:.:::.::         : 

-* 

»o  :::::::::::::::        : 

5 

Debit 

Cash 

Tickets 

co    ::::::::::         :         :         :          •         : 

co   :::::::::::::::         : 

io  :         :         :         |        •  .      ■         •         •         •         •         :     *  :         :         :        :        : 

4 

Money 
Orders 

Oi    '■■■■■'■         '■                            '■         '•                                              '■ 
co   ::■■:::::::::::         : 

oo  :       :       :       :       • 

t~h   ;         i         '.         ;         \         \         ',         '        '.         '         t         '•         '•         '•         i         : 

3 
Drafts 

ic:          :          :          :         :          :         :         :          :         :         :         :         :         :         :          : 
oi   :::::::::::::::         : 

Is-                       ::.:::::::;::: 
°            ::::::::::::::         : 

2  • 
Checks 

*-   :::::::::::::::         i 

00   :::::::::::::::         : 

1 

Total  of 

Itemized 

List 

^    :::::::::::::::          : 
oi   :::::::::::::::         : 

<n   •;:::..:::::;::         : 
r-   ......                             ........ 

i— i 
O 
0 

0    .2 

- 1 

In  Gold 
In  $20  Bills 
In  $10  Bills 
In  $  5  Bills 

In  $  2  Bills 

Tn  »    I   Bills 
in  *    *  or  Silver 

In  50c 

In  25c 

In  10c 

In    5c  . 

In     lc 

:          :          .          :          :          :    o  :     io  :     o  :     «o :     •«* 
:         :         :         :         :         :    »o :     i> :     ■*  :    o :     <n 

Ttn  :                    :          :         : 
c3J :         :         :         :         : 

co  :     tji  :     co  ■'     i-H  :     <—i :                   :         .                   : 

CNJ   :                :                : 

t^  .                  .         .         : 

DAILY  CASH  BALANCE  BOOK 

(1)  The  bookkeeper  or  cashier  should  supply  himself  with  a  small  book  properly  ruled — with 
twelve  columns  as  shown  in  the  illustration  of  the  Daily  Cash  Balance  Book.  Some  bookkeepers  make  out 
daily  report  on  a  sheet  of  paper,  but  it  is  better  to  have  a  permanent  book;  or  use  Loose-Leaf  System. 

(2)  He  should  find  the  balance  in  the  bank  as  shown  by  the  stub  of  his  check  book,  banking  ledger, 
or  check  register,  depending  on  which  method  is  used  to  keep  account  of  cash  in  bank. 

(3)  He  should  next  find  the  balance  on  hand  as  shown  by  the  Cash  Book. 

(4)  He  should  find  the  amount  in  the  Cash  Drawer  as  shown  by  the  illustration  in  the  Daily  Cash 
Balance  Book.  To  get  "Total  in  Drawer"  add  columns  1,  2,  3,  4,  5.  To  get  "Balance  in  Drawer" 
take  column  7  from  column  6.  If,  as  is  usually  the  case,  a  certain  amount  had  been  put  in  the  Cash  Drawer 
in  the  morning,  to  make  change  through  the  day,  this  amount  for  change  should  be  noted,  before  busi- 
ness opens  in  the  morning,  and  deducted  from  the  total  in  Drawer  at  night,  to  get  the  exact  receipts 
for  the  day.  The  balance  in  drawer  plus  the  balance  in  bank  should  equal  the  balance  on  hand  as 
shown  by  the  Cash  Book.  If  the  cash  drawer,  plus  balance  in  bank,  should  show  more  than  the 
balance  on  hand,  cash  is  "long;"  if  less,  cash  is  "short."      The  error  must  be  found. 

If    the  bookkeeper  will  write  in  Cash  Book  "ck."  (check)  "df."  (draft)  or  "cy."  (currency)  "P. 
O."   (postoffice    money  order)   "E.   M.   O."    (express  money  order),   etc.,  after  each  item  received  and 


JOBBING  BUSINESS  85 

also  after  each  item  of  Cash  paid  out,  the  information  in  these  notes  will  often  help  him  to  locate  his 
error.  If  an  amount  is  paid  out  by  check  or  draft  the  number  of  the  check  or  draft  should  always  be 
designated  in  the  explanation  column  of  his  Cash  Book.  If  the  bookkeeper  is  unable,  after  careful 
and  diligent  search  to  find  the  error,  he  should  debit  himself  by  writing  his  own  name  on  the  right- 
hand  page  of  the  Cash  Book,  with  the  explanation  "Cash  Short"  and  the  amount  "short"  following 
his  name,  in  red  ink.  Some  incident  the  next  day  may  disclose  the  "Cash  Short."  If  long,  then  he  should 
credit  himself  by  writing  his  name  on  the  left-hand  side  of  the  Cash  Book  with  the  explanation  "Cash  long" 
and  the  amount  "long"  following  his  name,  in  red  ink.  Again  some  incident  may  disclose  the  error 
and  it  should  be  corrected.  The  bookkeeper  should  not  allow  his  cash  account  to  show  "long"  or 
"short"  very  often.     If  he  does  he  will  be  "long"  on  time  and  "short"  on  a  job. 

(5)  If  the  stub  of  the  check  book  should  show  an  overdraft,  the  amount  of  the  overdraft  should  be 
taken  from  the  amount  in  the  drawer  to  get  the  amount  on  hand.  If  the  overdraft  should  be  greater 
than  the  amount  in  the  drawer,  the  difference  is  the  amount  of  cash  balance  overdrawn. 

(6)  He  should  show  the  page  of  his  Daily  Cash  Balance  Book  for  the  day,  to  the  proprietor. 

(7)  By  referring  to  the  illustration  (columns  9,  10,  12)  it  will  be  seen  that  the  difference  between 
the  two  sides  of  the  Cash  Book,  $1,269.66  less  $184.99,  equals  the  "Balance  on  hand,"  $1,084,67,  which 
proves  the  cash  account  for  the  day. 

FOR  BANK  ACCOUNT  IN  CASH  BOOK,  See  Par.  529 

PETTY  CASH  BOOK 

The  Petty  Cash  Book  is  a  book  in  which  record  is  made  of  petty  cash  purchases  of  small  office  sup- 
plies, etc.,  and  petty  cash  expenditures  such  as  carfare,  stamps,  express,  freight,  etc. 

The  directions  for  the  use  of  this  book  should  be  studied  in  connection  with  the  study  of  the  Petty 
account  in  the  Ledger.  The  two  accounts  are  very  different.  They  should  not  be  confused.  The  fact 
that  the  two  have  been  confused,  and  the  Petty  Cash  Book  charged  with  small  receipts  for  petty  sales 
of  merchandise,  etc.,  and  the  petty  cashier  allowed  to  buy  small  articles  on  time  and  pay  for  them  when 
some  petty  sale  was  paid  for,  has  led  to  confusion  and  opened  the  way  for  fraud.  The  Petty  account 
in  the  Ledger  should  be  kept  entirely  separate  and  apart  from  the  Petty  Cash  Book.  Petty  Sales  to 
customers  that  have  no  account  in  the  Ledger  should  be  charged  to  Petty  account  as  directed  under 
"Petty  or  Miscellaneous  account,"  see  par.  644,  and  when  they  are  paid  for  the  amount  should  go  into 
the  Mdse  Sales  for  the  day.  The  confusion  of  these  two  accounts,  combining  the  two  in  one,  is  designated 
as  the  common  way.  This  way  of  handling  Petty  Cash  Book  should  be  avoided.  The  Petty  or  Mis- 
cellaneous account  in  the  Ledger  is  a  great  convenience,  and  a  time-saver. 

IMPREST  PETTY  CASH  BOOK 

The  proper  way  to  keep  the  Petty  Cash  Book  is  by  what  is  often  called  the  Imprest  System  or 
the  Imprest  Petty  Cash  Book. 

If  this  method  is  properly  carried  out,  there  is  practically  no  chance  of  peculation  by  the  Petty 
Cashier,  as  all  his  transactions  are  brought  to  the  attention  of  the  head  cashier  or  bookkeeper  or  to 
the  proprietor. 

To  carry  this  method  out  properly  these  directions  must  be  religiously  followed : 

(1)  The  head  bookkeeper  or  head  cashier  issues  a  check  payable  to  the  petty  cashier,  who  is  some 
responsible  employee,  for  an  amount  that  has  previously  been  decided  on  as  the  amount  necessary  to  take 
care  of  all  petty  expenditures,  for  a  month,  which  cannot  be  conveniently  paid  by  check. 

(2)  All  receipts  of  cash  (pennies  included)  are  to  be  deposited  at  bank  daily,  either  at  night  or 
early  next  morning. 

(3)  The  petty  cash  book  is  to  have  no  other  source  of  receipts  except  by  check  from  the  book- 
keeper or  head  cashier. 

(4)  The  petty  cashier  is  not  to  buy  anything  on  time,  but  is  to  make  additional  requisition  (Imprest) 
on  the  head  cashier  when  his  funds  run  low. 

(5)  The  petty  cashier  is  to  get  a  receipt  in  some  form,  either  an  O.  K'd  or  initialed  statement,  for 
each  expenditure,  no  matter  how  small.  Expenditures  for  small  items  like  carfare,  etc.,  can  be  O.  K'd 
by  the  bookkeeper,  cashier,  or  some  one  in  authority  that  ordered  or  approved  the  expenditure.  In 
this  way,  a  voucher  for  each  expenditure  may  be  s-ibmitted  to  the  bookkeeper  or  head  cashier  at  the 
end  of  the  month  (or  other  time)  when  the  petty  cashier  makes  additional  requisition  for  an  amount 
sufficient  to  keep  his  fund  up  to  the  amount  decided  on  as  necessary.  Then  the  Petty  account  is  as 
readily  audited  as  any  other  account. 

Suppose  the  amount  decided  on  is  $60.  It  will  be  seen  from  the  accompanying  illustration  that 
the  total  petty  expenditure  for  the  month  of  September  was  $27.27.  Then  the  petty  cashier  submits 
his  vouchers  for  his  expenditures  and  makes  a  requisition  (demand  or  Imprest)  for  an  amount  necessary 
to  start  out  at  the  beginning  of  the  month  with  the  required  amount  for  the  expenditures  for  the  month. 

The  classification  for  the  expenditures  in  the  illustration  is  only  suggestive.  The  Petty  Cash  Book 
may  have  few  or  many  columns,  depending  on  how  minutely  the  bookkeeper  desires  to  classify  such 
expenditures. 

The  Petty  Cash  Book  is  opened  by  entering  "Petty  Cash  Book  $60"  on  the  right-hand  page  of  the 
General  Cash  Book.  When  the  petty  cashier  submits  his  vouchers  at  the  end  of  the  month,  the  head 
bookkeeper  or  head  cashier  issues  another  check  sufficient  in  amount  to  make  up  the  difference  between 
the  petty  cashier's  total  expenditures  and  the  $60.  The  bookkeeper  would  then  debit  the  accounts, 
according  to  this  classification,  by  entering  on  the  right-hand  page  of  the  General  Cash  Book,  Freight 
$12.52,  Drayage  $3.50,  Express  $.25,  Postage  $6.00,  Stationery  $.80,  Expense  $4.20.  This  check 
would  be  made  payable  to  the  petty  cashier  as  before,  but  charged  to  the  above  accounts  and  not  to 
the  Petty  Cash  Book. 

From  the  illustration  it  will  be  seen  that  the  petty  cashier  starts  out  at  the  beginning  of  each  month 
with  $60  or  whatever  amount  has  previously  been  decided  on.  The  illustration  shows  the  method  of 
balancing  and  closing  the  Imprest  Petty  Cash  Book. 

The  Petty  Cash  Fund  is  to  be  kept  in  separate  compartment  and  no  one  but  the  petty  cashier  is  to 
have  access  to  that  compartment. 

If  at  any  time  the  amount  is  found  too  small  it  should  be  increased  to  meet  the  expenditures  for 
a  full  month  and  thus  avoid  unnecessary  entries  on  the  General  Cash  Book. 

The  foregoing  method  of  handling  the  Petty  Cash  Book  is  in  vogue  in  many  of  the  most  pro- 
gressive houses. 


86 


JOBBING  BUSINESS 
IMPREST  PETTY  CASH  BOOK 


Date 

Explanation 

Vou- 
cher 
No. 

Receipts 

Freight 

Drayage 

Express 

Postage 

Station- 
ery 

General 

Total 
Paid 

19 

Sept. 

16 

56 

Check  No.  136 

60 

16 

Carfare 

1 

10 

10 

17 

Express,  Fargo 

2 

25 

25 

17 

Freight,  B  &,0 

3 

12 

52 

12 

52  ! 

18 

Drayage,  Hogan  Co. 

4 

3 

50 

3 

50 

24 

Stamps,  300  2  cent 

5 

6 

6 

27 

Box  Esterbrook  Pens 

6 

80 

80 

28 

Messenger,  A  D 

7 

20 

20 

30 

Washing  Windows 

8 

3 

90 

3 

90 

12 

52 

3 

50 

25 

6 

80 

4 

20 

27 

27 

30 

79 

Check  No.  208 

27 

27 

* 

3° 

Balance  on  hand 

• 

6o 

87 

27 

87 

27 

19 
Oct. 

1 

Balance  on  hand 

60 

*  Italic  line  Bed  Ink. 


CASH  BOOK  EXAMINATION 


1.  What  is  a  Cash  Book? 

2.  How  many  pages  are  used  to  represent  the  Cash 
account  ? 

3.  Which  side  of  the  Cash  account  does  the  left- 
hand  page  represent?     Which  the  right-hand  page? 

4.  If  the  left-hand  money  column  on  the  left-hand 
page  is  used  for  items  and  the  right-hand  money  column 
on  the  same  page  is  used  for  totals,  what  is  the  effect  of 
writing  the  name  of  an  account  on  the  left-hand  page? 

5.  Using  the  columns  as  in  question  4,  how  are  ac- 
counts on  the  left-hand  page  posted? 

6.  If  the  left-hand  money  column  on  the  right-hand 
page  is  used  for  items  and  the  right-hand  money  column 
on  the  same  page  is  used  for  totals,  what  is  the  effect  of 
writing  the  name  of  an  account  on  the  right-hand  page  ? 

7.  If  the  left-hand  money  column  on  the  left-hand 
page  is  used  to  record  Mdse  sales,  and  the  right-hand 
money  column  on  the  same  page  to  record  Sundries, 
how  post  from  the  left-hand  page? 

8.  If  the  left-hand  money  column  on  the  right-hand 
page  is  used  to  record  Expense  items,  and  the  right- 
hand  money  column  on  the  same  page  to  record  Sundries, 
how  post  from  the  right-hand  page? 

9.  If  the  left-hand  money  column  on  the  left-hand 
page  is  used  to  record  Mdse  sales,  and  the  right-hand 
money  column  on  the  same  page  to  record  Sundries; 
and  the  left-hand  money  column  on  the  right-hand 
page  is  used  to  record  Mdse  purchases,  and  the  right- 
hand  money  column  on  the  same  page  to  record  Sundries, 
how  post  from  the  left-hand  page?  From  the  right- 
hand  page? 


10.  Using  the  columns  as  in  question  9,  how  many 
entires  and  how  many  postings  would  you  save  in  the 
entries  illustrated  on  pages  83  and  84? 

11.  If  the  right-hand  money  column  on  the  left-hand 
page  is  used  to  record  the  amount  of  money  actually 
received,  and  the  left-hand  money  column  on  the  same 
page  to  record  the  amount  of  Mdse  Dis.,  in  what  column 
would  you  set  the  amount  of  a  Sundries  account?  How 
would  you  post  from  the  left-hand  page? 

.12.  If  the  left-hand  money  column  on  the  right-hand 
page  is  used  to  record  the  amount  of  cash  actually  paid, 
and  the  left-hand  money  column  on  the  same  page  to 
record  the  Mdse  Dis.,  in  what  money  column  would  you 
set  the  amount  of  an  Expense  item?  How  would  you 
post  from  the  right-hand  page? 

13.  If  the  money  columns  are  used  as  in  question  4, 
and  you  allow  a  discount,  how  would  the  discount  be 
entered?  How  would  the  account  be  entered?  How 
post  each? 

14.  Using  the  money  columns  as  in  question  4,  and 
you  are  allowed  a  discount,  how  would  the  discount  be 
entered?  How  would  the  account  be  entered?  How 
post  each? 

15.  Describe  how  you  would  prove  your  bank  ac- 
count. 

16.  If  the  bank  account  is  off,  how  would  you  proceed 
to  find  the  error? 

17.  Describe  how  to  use  a  Daily  Cash  Balance  Book. 

18.  What  precautions  would  you  take  in  entering 
items  in  your  Cash  Book  to  assist  you  to  locate  mis- 
take? 


JOBBING  BUSINESS 
JOURNAL    ENTRIES 


87 


1.  Mdse  sold  for  time  pa- 
pers, such  as  notes,  diafts,  ac- 
ceptances, etc.  Sale  not  item- 
ized. 


2.  Mdse  sold  for  time  pa- 
pers, such  as  notes,  drafts,  ac- 
ceptances, etc.  The  sale  item- 
ized. 


3.    Bought  Mdse  .  paying  for 
same  by  a  sight  draft. 


4.    Mdse 
acceptance. 


bought    for  your 


5.    Bought  Mdse. .giving  in 
payment  cash  and  Mdse. 


6.    Sold  Mdse     receiving  in 
payment  cash  and  Mdse. 


7.  Cash  received  in  pay- 
ment for  time  papers,  such  as 
notes,  drafts,  acceptances,  etc. 


8.    Paid  cash  for  your  own 
interest  bearing  paper. 


9.  The  bank  notifies  you  of 
collection  of  time  papers  not 
bearing  interest,  which  have 
been  left  by  you  for  collection, 
the  net  proceeds  being  placed 
to  your  credit. 


10.  The  bank  notifies  you 
that  they  have  collected  inter- 
est bearing  time  papers,  net 
proceeds  being  placed  to  your 
credit. 


Bills  Rec. 
Mdse 
Sold  to  D.  M.  Grant  Mdse  as  per  bill  rendered  for  his 
30  day  note,  Reg.  No.  26. 


Bills  Rec,  Reg.  No.  22 

Mdse 

10  brls.  Flour 

4     "     Pork 


$  5 
20 


Less  5  %  Dis. 


.  |50 
.     80 

$130 
6.50 


Mdse 

H.  S.  Jones 
Gave  W.  J.  Quinn  sight  draft  on  H.  S.  Jones  in  full 
for  Inv.  No.  108. 


Mdse 

Bills  Pay. 
Accepted  W.  S.  Conklin's  draft  at  ten  days'  sight, 
Reg.  No.  42,  for  lnv.  No.  110. 


Mdse. 

Cash 

Mdse 
Paid  cash  $125,  Ck.  No.  96  and   Mdse.  $75    (6  brls. 
Pickles  @  $12.50),  in  full  for  Inv.  No.  149. 


Cash 
Mdse 

Mdse 
Sold  to  R.  T.  Brown  : 
10  brls.  Flour 

4  "     Pork 

5  "     Beef 
10     "     Salt 


$  5     $50 

20     80 

12     60 

4     40 


230 


Reed,   in  payment  cash 
Inv.  No.  163. 


Cash 


5,  and  Mdse   $132,  as  per 


Bills  Rec. 
Reed.  E.  B.  Morgan's  Ck.  No.  432  for  his  acceptance 
at  30  days,  Reg.  No.  29. 


Hills  Pay. 
Int.  &  Dis. 

Cash 
Gave  B.  M.  Thomas  my  Ck.  No.  142  for  Reg.  No.  29, 
with  90  days'  Int.  at  6$. 


Cash 

Coll.  &  Dis. 

Bills  Rec. 
Merchants  Bank  collect  M.  A.  Dunham's  30  day  note, 
Reg.  No.  45.     Net  proceeds  placed  to  my  credit. 


Cash 

Coll.  &  Dis." 
Bills  Rec. 
Int.  &  Dis. 
Merchants  Bill  collect  J.  P.  Southworth's  30  day  note, 
Reg.  No.  54,  and  60  days'  Int.  at  6#.     Net  proceeds 
placed  to  my  credit. 


125 


123 


50 


125 


123 


50 


236 


316 


200 


236 


316 


125 
75 


98 
132 


230 


145 


361 
5 


174 


145 


352 


48 
42 


366 


90 


175 


350 
3 


50 


88 


JOBBING  BUSINESS 
JOURNAL  ENTRIES— Continued 


11.  When  you  buy  a  Bank 
Draft,  Bill  of  Exchange,  Ex- 
press Money  Order,  or  other 
paper  for  which  you  pay  a 
charge  and  remit  to  some  per- 
son on  account. 


12.  When  you  pay  for  a 
horse  and  wagon,  stove,  desk, 
office  chairs. 


13.    When  you  prepay  your 
own  note,  obtaining  discount. 


14.  The  Bank  pays  your 
note  and  charges  same  to  your 
account. 


50 


79 


C.  R.  Williams 
Exchange 
Cash 
Sent  C.  R.  Williams  Chicago  Exchange  No.  2639  for 
$241.20  to  apply  on  %.    Exchange  30c,  Ck.  No.  903. 


Chattels 

Furniture  and  Fixtures 
Cash 

Bought  Horse  and  Wagon  of  H.  M.  Cutler  for  use  in 
the  business,  $250,  also  Furniture  and  Fixtures  as 
per  Inv.  No.  158.     Paid  for  same  by  Ck.  No.  942. 


Bills  Pay. 

Cash 

Int.  &  Dis. 
Gave  Brown  &  Co.  my  Ck.  No.  126  in  full  for  Reg. 
No.  42,  less  special  Dis.  of  $5  for  prepaying  same. 


Bills  Pay. 
Int.  &  Dis. 

Cash 
Merchants   Bank  paid  our  note  favor  J.  W.   Bryce- 
Reg.  No.  138— and  60  days'  Int.  6*. 


398.  Receipts.  When  a  person  pays  money  or  delivers  property  to  another  on  account  or  for 
any  other  purpose,  the  person  who  receives  the  money  or  property  should  give  the  person  from  whom  it 
was  received  a  written  acknowledgement  of  the  same.  This  acknowledgement  is  called  a  receipt. 
Receipts  are  unnecessary  when  property  is  paid  for  and  delivered  at  the  time  of  sale,  but  where  a  bill  is 
rendered  for  a  cash  sale  of  merchandise  it  is  customary  to  receipt  the  bill.  The  following  is  the  common 
form  of  receipt. 


241 

20 
30 

241 

250 
69 

79 

319 

500 

495 
5 

300 
3 

303 

No._Z^L 


Date 


(2^ 


ZL. 


.I90_£i. 


For. 


No.^Z. 


R 


CJ^^i?>4^^?^^^f  (/^^^^J?^ 


.Dollars 


College  Currency 


jL& 


,5^S<S^4^y 


Receipt  on  Account. — A  receipt  of  this  kind  acknowledges  a  payment  on  account,  and 
Implies  a  balance  remaining  unpaid. 


A»  S*~A~^,^~,^- 


(  /Arft^, 


\  .-f-i»-7 aacaaaa^da^ '  ^T- 


/*>,,  /pop 


l  X^sJ^^^y^^-t-d/  CZj^Jr^/rS 


Collars 


.jm^ 


Jtsfeor 


w^Sjg^/- 


JOBBING  BUSINESS  89 

399.  The  Columnar  Journal — The  Columnar  Journal  is  now  first  introduced  into  your  work. 
The  purpose  of  this  class  of  books  is  to  save  time  and  labor  by  posting  aggregate  amounts  instead 
of  the  separate  amounts  in  certain  classes  of  transactions. 

400.  Four-Column  Journal, — As  its  name  indicates,  this  book  consists  of  four  money  columns,— 
two  for  the  debit  side  and  two  for  the  credit  side, — the  entries  being  recorded  in  the  middle  of  each  page 
between  the  debit  and  credit  sides.  See  pages  90  and  91.  The  sundries  columns  are  for  the  entry 
of  all  amounts  other  than  merchandise,  while  the  merchandise  columns  are  for  the  purchases  and  sales  of 
merchandise  except  sales  on  account.     See  par.  433,    5.53,    620. 

401.  The  amounts  in  the  sundries  columns  are  posted  as  in  the  common  Journal,  while  the  mer- 
chandise columns  are  posted  through  their  aggregate  footings  at  the  close  of  the  day,  week,  or  month. 

402.  Column  Footings. — In  keeping  this  book,  the  footings  of  each  of  the  four  columns  are  entered 
in  black  ink  at  the  bottom  of  each  page  (see  form) ;  but  before  making  these  entries  their  accuracy  should 
be  tested  by  comparing  the  sum  of  the  footings  of  the  two  debit  columns  with  that  of  the  credit  columns; 
these  sums  of  course  should  be  equal.  For  the  purpose  of  making  this  comparison,  the  footings  of  the 
columns  should  be  first  written  on  a  piece  of  waste  paper,  and  when  found  to  be  correct,  should  be  entered 
in  black  ink  at  the  foot  of  each  column,  and  then  carried  forward  to  their  respective  columns  at  the  top  of 
the  next  page.     See  forms  on  pages  90  and  91. 

403.  At  the  time  of  posting  the  merchandise  columns,  or  whenever  the  books  are  closed,  the  columns 
should  be  balanced,  as  shown  on  the  last  page  of  the  accompanying  form,  at  which  time  the  aggregate 
footings  of  the  merchandise  columns  are  posted  to  the  Merchandise  account  in  the  Ledger. 

404.  The  form  of  Four-column  Journal  herewith  given  will  illustrate  the  general  method  of  keeping 
this  book. 

405.  Opening  Entry. — The  opening  entry  for  this  book  does  not  differ  materially  from  that  of  an 
ordinary  Journal.  All  resources  are  entered  in  the  .  debit  sundries  column  and  all  liabilities  in  the  credit 
sundries  column.  The  merchandise  inventory  is  not  entered  in  the  merchandise  column  for  the  reason 
that  it  already  appears  in  the  Ledger;  if  it  were  entered  in  the  merchandise  column,  it  would  be  posted 
with  the  final  aggregate  footing  of  that  column  at  the  close  of  the  business,  and  hence  would  reach  the 
Ledger  a  second  time. 

406.  Direction. — After  examining  the  opening  entry  in  the  accompanying  form,  write  the  opening 
entry  required  on  the  first  page  of  your  Four-column  Journal. 

PRIVATE    ACCOUNT 

407.  A  Private  account  is  an  account  kept  with  the  proprietor,  separate  from  the  Stock  account. 
There  are  several  reasons  for  keeping  this  account,  in  it  should  appear  all  withdrawals  from  the  business 
by  the  proprietor  to  meet  personal  expenses,  which  are  supposed  to  be  paid  from  the  profits  of  the 
business  and  not  withdrawn  from  the  capital.  This  account  is  not  kept  by  all  bookkeepers,  but  it  should 
be,  as  it  prevents  withdrawals  and  unimportant  changes  from  appearing  in  the  Stock  account,  this  account 
remaining  unchanged  till  the  end  of  the  year,  which  is  generally  desirable,  as  it  represents  the  working 
capital  of  the  business.  However,  if  large  sums  are  permanently  withdrawn  from  the  business,  they  should 
be  charged  to  the  Stock  account,  and  not  to  the  Private  account. 

408.  The  Private  account  is  sometimes  opened  for  the  purpose  of  reducing  the  Stock  account  to 
even  hundreds  or  thousands  before  admitting  a  partner. 

409.  This  account  is  sometimes  provided  with  a  credit  amount,  against  which  to  draw,  as  in  cases 
where  the  partners  of  a  business  are  allowed  a  salary  for  their  services.  This  is  usually  placed  to  the  credit 
of  each  partner's  Private  account  at  the  end  of  the  month  or  year  as  desired. 

410.  It  must  not  be  forgotten  that  when  salaries  are  allowed  the  partners,  the  business  will  show 
that  much  more  of  a  loss,  and  if  the  real  earnings  of  the  business  are  wanted,  the  amount  of  these  salaries 
must  be  taken  into  consideration;  but  as  the  Private  accounts  will  snow  a  corresponding  gain,  the  business 
is  not  affected  by  allowing  the  salaries. 


90 


JOBBING  BUSINESS 
Cincinnati,  O.,  Nov.  i,  19 


MDSE 

SUNDRIES 

L.F. 

EXPLANATION 

L.F. 

SUNDRIES 

MDSE 

I,  H.  B.  Burton,  have  this  day  adopted  the  Four-Column 

Journal  as  a  book  of  original  entry.     The  resources  and 

liabilities  of  my  business  at  the  present  time  are  as  follows: 

6,425 

50 

9 

Cash,  per  C.  B.,  page  9 

975 

20 

4 

Mdse  per  Inv'ry. 

1,218 

40 

6 

Bills  Rec.  Reg.  No.  9 

340 

7 

W.  D.  Gordon  on  acc't. 
Bills  Pay.  Reg.  No.  6 
W.  D.  McGraw,  on  acc't. 
H.  B.  Burton,  Stock. 

8 

12 

1 

582 

456 

7,919 

50 
80 
80 

742 

80 

Mdse                                                                              Bills  Pay. 
Gave  E.  C.  Miller  our  30  day  note  as  per  Reg.  No.  20 
in  full  for  invoice  No.  130. 

742 

80 

298 

10 

560 

50 

Mdse                                                                                 Bills  Pay. 
Accepted  E.  B.  Morgan's  draft  at  10  days'  sight,  Reg. 
No.  21,  in  full  for  invoice  No.  141. 

Bills  Rec.                                                                             Mdse 
Sold  Mdse.  as  per  bill  rendered  to  Geo.  Snyder  for  his 
draft  at  10  days'  sight  on  Harry  Hunter,  Reg.  No.  36. 

298 

10 

560 

50 

145 

20 

Mdse                                                                         D.  M.  Grant 
Gave  VV.  J.  Quinn  a  sight  draft  at  10  days  on  D.  M. 
Grant  in  full  for  Inv.  No.  142. 

145 

20 

148 

20 

Mdse                                                                        A.  E.  Brown 
Inv.  No.  143  on  account 

146 

20 

460 

50 

300 

Nov.  2,  190 
Mdse                                                                           Bills  Pay. 

W.  G.  Evans 

Gave  W.  G.  Evans  my  60  day  note  for  $200,  interest 

at  6  %,  Reg.  No.  22,  in  part  payment  of  Inv.  No.  144,  balance 

on  account. 

Bills  Rec.                                                                    Mdse 

J.  B.  Cobb 
Received  J.  B.  Cobb's  60  day  note  for  $300,  interest  at 
6$,  Reg.  No.  45,  in  full  for  Mdse  as  per  bill  rendered  $100, 
balance  of  $200  to  apply  on  his  account. 

200 
260 

200 

50 

100 

180 

Mdse                                                                         Bills  Pay. 

J.  M.  Griffin 
Gave  J.  M.  Griffin  my  90  day  note  for  $100,  interest  at 
4#,  Reg.  No.  23,    in  part  payment  of  Inv.  No.  44,  $180, 
balance  on  account. 

80 
100 

W 

125 

60 

91 

Bills  Rec.                                                            Am.  Mdse  Co. 
Accepted  my  ten  day  draft  favor  self,  Reg.  No.  43,  to 
apply  on  %. 

Fwd 

I    91 

125 

1,9/2 

9,944 

1  11,236 

90 

660 

50 

JOBBING  BUSINESS 
Cincinnati,  O.,    Nov.   2,    19 


91 


MDSE 

SUNDRIES 

L.F. 

L.F. 

90 

SUNDRIES 

M  DSE 

1,972 

80 

9,944 

60 

90 

Bit  Fwd 

11,256 

90 

660 

50 

51 

Bills  Rec.     Reg.  No.  46.                                                   Mdse 

3  brls.  Beef,        $12.00           $36.00 
5  tons  Bran,            3.00              15.00 

51 

* 

640 

O.  C.  Dailey.                                                             E.  C.  Mills 

Gave  O.  C.  Dailey  for  %  in  full  to  date  a  10  day  draft 
on  E.  C.  Mills. 

640 

480 

R.  W.  Walters.                                                               Bills  Pay. 

Gave  him  my  30  day  note,  Reg.  No.  49,  Int.  6$,  in  full 
for  Inv.  of  9th  ult. 

480 

200 

Bills  Rec.                                                                  W.  B.  Jones 

Rec'd  his  30  day  note,  Reg.  No.  48,  Int.  6#,  in  full  for 
bill  of  3d  inst. 

200 

360 

Bills  Rec. 

40 

Mdse     Dis.                                                               J.  B.  Brown 

Rec'd  his  demand  note,  Reg.  No.  50,  Int.  1%,  in  full 
for  bill  9th  inst.,  less  special  10$  Dis.  if  paid  by  note. 

Nov.  5,  190 

400 

600 

O.  M.  Powers.                                                         Bills  Pay. 

Mdse    Dis. 

Gave  my  10  day  note,  Reg.  No.  50,  in  full  for  Inv.  No. 
36,  less  special  1  %  Dis.  as  per  agreement. 

594 
6 

1,000 

Mdse                                                                     B.  J.  Donovan 

Bills  Pay. 

Gave  B.  J.  Donovan  my  10  day  note,  Reg.  No.  61,  Int. 
6#.  to  apply  on  Inv.  No.  40,  Bal.  on  %. 

600 
400 

| 
300 

W.  B.  Brown                                                                  Bills  Pay. 

Accepted  his  30  day  draft,  favor  Merchants  Bank,  Reg. 
No.  63,  in  full  for  %  to  the  1st  inst. 

300 

100 

B.  C.  Collins                                                            C.  M.  Gilbert 

Gave  B.  C.   Collins  a  ten   day  sight  draft  on   C.    M. 
Gilbert  for  my  %  in  full  to  the  3d  inst,  same  to  apply  on  % 
with  Collins. 

100 

1,000 

60 

80 

O.  E.  Dunlap                                                                 Bills  Pay. 

Gave  him  my  4  months  note,  Int.  6  %,  Reg.  No.  54,  for 
an  accommodation.     He  agrees  to  pay  same   before  ma- 
turity and  has  deposited  100  shares  of  Union  Iron  Works 
Stock  with  me  as  security. 

Dr.        Mdse         Cr. 

1,000 

90 
50 

711 

t 

1,972 

80 

14.715 
1,972 

15,976 
711 

50~ 

16,688 

40 

1 

16,688 

40 

92 


JOBBING  BUSINESS. 


411.  Balance  Sheet. — The  form  of  Balance  Sheet  here  given  has  the  merit  of  compactness,  clear- 
ness, and  convenience.     The  principle  involved  is  the  same  as  the  one  hitherto  used,  the  greatest  differ- 
ence being  in  the  arrangement  of  the  resources,  liabilities,   losses,  and  gains.     An  inspection  of  the  accom 
panying  form  should  enable  the  student  to  use  it  properly.     Observe  that  the  inventories  are  entered  in 
red  ink.     Italic  figures  thus,  1250,  indicate  red  ink. 

412.  When  instructed  to  use  this  form  of  Balance  Sheet,  make  it  out  on  balance  sheet  paper, 
and  submit  it  to  your  teacher  for  inspection.  If  approved,  enter  a  copy  of  it  in  your  Balance  Sheet 
Book.      For  other  forms  of  Balance  Sheets,  see  pages  107,    108,    116,   144. 

Balance  Sheet  or  Financial  Exhibit  of  H.  B.  Burton's  Business,  Dec.  31,  19 


L  F 

LEDGER  ACCOUNTS 

TRIAL  I 

tALANCE 

BALANCE  OF  BALANCES 

LOSS  AND  GAIN  ACCT 

Debits 

Credits 

Resources 

Liabilities 

Losses 

Gains 

1 

H.  B.  Burton  Stock 

5000 

2 

Cash 

9670 

50 

6380 

40 

3290 

10 

3 

Expense 

100 

100 

4 

Mdse 

6460 

40 

7560 

40 

1250 

2350 

5 

B.  F.  Stone 

1150 

1150 

6 

H.  Murphy 

264 

945 

50 

681 

50 

7 

F.  B.  Clark 

2062 

30 

235 

80 

1826 

50 

8 

J.  F.  Wyman 

1520 

90 

24G9 

65 

948 

75 

9 

D.  M.  Ellis 

1379 

75 

1749 

50 

369 

75 

10 

W.  D.  Campbell 

1966 

80 

233 

40 

1733 

40 

24574 

65 

24574 

65 

9250 

00 

2000 

00 

100 

2350 

H.  B.  Burton 

Cr.  by  Net  Stock  Acct 

5000 

Cr.  by  Net  Gain 

2250 

2250 

H.  B.  Burton's  Present  W'th 

7250 

7250 

7250 

7250 



9250 

00 

9250 

00 

2350 

2350 

STEPS  IN  CLOSING  BOOKS 

413.  It  is  important  to  observe  proper  and  regular  order  in  the  various  steps  required  in  closing  a 
set  of  books.  As  a  general  guide  to  the  student,  these  steps  are  herewith  given,  and  he  is  expected  to 
follow  them  in  all  closings. 

(1)  Post  your  books;  (2)  Add  all  accounts;  (3)  Take  a  Trial  Balance;  (4)  Test  your  Cash;  (5)  Test 
your  Bills  Receivable  and  Bills  Payable  accounts;  (6)  Take  an  inventory  of  stock;  (7)  Rule  up  all  accounts 
that  are  in  balance;  (8)  Make  out  a  Balance  Sheet;  (9)  Enter  all  inventories;  (10)  Close  your  books;  (11) 
Rule  up  all  accounts  that  have  been  balanced;  (1^)  Balance  and  rule  up  your  Stock  account;  (13)  Take 
a  Balance  of  Balances;  (14)  File  your  invoices;  (15)  Make  out  a  "Final  Report  and  Statement  of  your 
Business"  in  the  Report  Book;  (16)  Prepare  your  books  for  inspection;  (17)  Present  your  books  to  your 
teacher.  , 

414.  Closing  Without  Journal  Entries.- Many  bookkeepers  close  the  Ledger  without  employing 
closing  Journal  Entries.  This  is  done  by  entering  in  red  ink  the  balance  of  the  various  loss  and  gain 
accounts  in  the  Ledger  and  the  Ledger  page  to  which  the  losses  or  gains  are  transferred,  and  then  trans- 
ferring these  balances,  together  with  the  Ledger  page  from  which  they  are  obtained,  to  the  Loss  and  Gain 
Account  in  black  ink;  the  account  to  be  closed  is  then  ruled.  The  Loss  and  Gain  Account  is  closed  by 
entering  the  net  losses  or  net  gains  in  red  ink,  together  with  the  page  of  the  proprietor's  account,  which 
balance  is  then  transferred  with  the  page  of  the  Loss  and  Gain  Account  to  the  Proprietor's  Stock  Account, 
his  new  present  worth  being  entered  in  red  ink  and  brought  down  below  the  ruling  as  heretofore.  See 
the  accounts  on  page  93.     Also  pages  35,  36. 


JOBBING  BUSINESS 


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PRODUCE  AND  PROVISION  BUSINESS 


FIRM  NAME 


415.  The  Ledger  rarely  ever  contains  an  account  with  the  firm;  that  is,  by  using  the  name  of  the 
firm  as  a  ledger  heading.  But,  when  it  is  done,  the  account  represents  the  entire  investment  of  the  firm, 
regardless  of  what  the  various  partners  have  invested.  This  account  is  debited  or  credited  at  the  end  of 
the  year  for  the  loss  or  gain,  and  the  articles  of  copartnership  should  stipulate  the  amount  of  each  partner's 
investment,  his  proportion  of  the  loss  and  gain,  etc.  A  common  and  practical  method  of  conducting  the 
accounts  of  a  partnership  concern  is  to  open  a  separate  stock  account  with  each  partner,  crediting  them 
respectively  for  their  investments  on  beginning  business,  all  additional  investments,  and  their  proportion  of 
the  gain,  and  debiting  them  for  withdrawals,  and  losses. 

416.  Stock. — The  word  "  Stock"  is  a  title  that  is  sometimes  used  to  represent  the  amount 
invested  by  a  single  proprietor  or  by  all  the  members  of  a  firm,  but  this  custom  is  not  a  good  one,  being 
in  no  way  an  improvement  on  the  ' '  Firm  Name. "  The  best  method  in  all  cases,  single  proprietor  or 
partnership,  is  to  open  an  account  with  each  individual  by  using  his  name  and  the  word  "  Stock  "  as  a 
ledger  heading. 

417.  The  word  "  Stock  "  is  sometimes  used  in  the  place  of  Mdse. 

418.  This  business  is  to  be  conducted  as  a  partnership,  and  comprises  a  larger  number  and  a 
greater  variety  of  transactions  than  have  been  introduced  in  your  previous  business.  It  also  requires  for 
its  successful  management,  a  more  thorough 'knowledge  of  bookkeeping. 

419.  Partnership. — A  partnership  is  the  voluntary  association,  in  good  faith,  of  two  or  more 
persons  for  the  purpose  of  carrying  on  some  specified,  lawful  business.  In  partnership  associations, 
each  partner  may  or  may  not  contribute  an  equal  share  of  the  capital  necessary  for  carrying  on  the 
business,  as  one  of  the  parties  may  invest  all  the  capital,  and  another  give  only  his  labor,  time,  skill, 
or  experience,  to  the  business. 

420.  There  is  usually  an  agreement  as  to  the  apportionment  of  profits  or  losses  among  the  partners; 
but  in  the  absence  of  such  agreement,  the  losses  or  gains  are  shared  equally,  regardless  of  the  amounts 
invested  by  the  several  partners. 

421.  General  Arrangements,  etc — You  are  to  make  a  mutually  satisfactory  arrangement  with  a 
student,  by  which  he  is  to  become  a  partner,  making  an  investment  of  cash,  merchandise,  and  bills  receiv- 
able. This  amount  may  equal  your  present  net  capital,  or  it  may  not  be  more  than  one  half,  one  third,  or 
even  one  fourth  of   this  sum. 

422.  In  arranging  for  the  formation  of  the  partnership,  you  should  agree  upon  the  proportion  of 
gains  or  losses  that  is  to  be  shared  by  each  partner. 

423.  You  are  to  conduct  the  entire  business  and  keep  the  books,  for  which  services  you  may 
receive  a  stated  salary  which  should  not  exceed  $100  a  month. 

424.  An  arrangement  must  be  made  whereby  the  partnership  may  be  dissolved  at  any  time,  by 
either  partner  serving  a  notice  upon  his  copartner. 

425.  The  firm  name  must  be  formed  by  adding  "&  Co."  to  your  own  name,  as  "H.  B.  Burton 
&  Co.,"  the  name  of  the  partner  not  appearing.     This  will  avoid  confusion  in  the  work  of  the  school. 

426.  Copartnership  Agreement. — Every  legal  copartnership  rests  upon  a  contract,  either  ex- 
pressed or  implied,  on  the  part  of  the  parties.  It  is  usual  for  this  contract  to  be  drawn  up  in  legal  form, 
and  duly  signed  by  the  persons  forming  the  partnership.  The  instrument  is  usually  acknowledged  before 
a  Notary  or  other  proper  official.     Such  a  contract  is  known  as  a  "  Copartnership  Agreement." 

427.  A  Copartnership  Agreement,  like  any  other  contract,  may  be  annulled  or  altered  at  any 
time  by  the  mutual  agreement  of  the  parties;  but  if  altered,  the  changes  must  be  in  writing,  and  signed  by 
both  parties  in  order  to  make  them  binding. 

428.  The  accompanying  form  represents  such  a  blank  as  is  ordinarily  filled  out.  If  your  partner- 
ship arrangement  has  been  made,  study  this  form  carefully,  then  secure  from  your  teacher  two  ' '  Copartner- 
ship Agreement"  blanks,  and  fill  out  one  of .  them  in  accordance  with  the  terms  upon  which  your 
partnership  has  been  formed.  Submit  it  to  your  partner  for  his  approval.  If  approved,  prepare  the  dupli- 
cate copy,  sign  both  copies  and  have  your  partner  sign  them,  in  the  presence  of  two  witnesses,  whose 
signatures  should  also  appear  on  both  documents. 

429.  The  accompanying  form  is  intended  merely  as  a  guide  to  the  student.  In  drawing  up  your 
own  agreement  have  it  conform  strictly  to  the  arrangement  made  with  your  partner,  which,  of  course,  may^ 
vary  in  several  particulars  from  the  blank  here  filled  out. 

430.  When  the  agreements  are  duly  signed,  deliver  one  to  your  partner  and  retain  the  other  foi 

yourself. 

[94] 


XLhts  agreement  Mitnessetb,  That  3/:  9B.  9Bur/on 

Of  zHocA/ord,    Jfi//.,  and  fl.    3.    2A/armcn 

oi  znecAford,  JP//.,  have  this  day  agreed  to  associate  themselves  together  in  a  copartner- 

ship, for  the  purpose  of  engaging  in  the  business  of  /uyinp.  and  se//inp  for  firofi/ ,   zTrodace  and  z/rovisiom  ana* 
o/Aer  ^/fierc/tandise, 

at  3tccAford,  in  Jrtnnc/aao  County,  3//incii, 

under  the  firm  name  and  style  of  2A£  zfi.  zWur/ou  &  ^ot>., 

the  term  of  said  copartnership  to  continue  Vne  pear*  from  and  after  the       3irs/  day 

of     feme,  19     ,       unless  sooner  dissolved. 

The  investment  of  the  aforesaid  partners  is  to  be  as  follows  : 

3t.    ZAJ.    3/ur/on  is  /o  inves/  /Ae  resources  ai  s/ioton  /u  /Ae  /as/  ^AJa/ance  j/iee/  in  /Ae   JrAc/esa/e  3r/our  3f usiness 
Aere/o/ore  conduc/ed  /u  Aim,    ana  //te  /ia/i/i/ies  of  said  /usiness  are  /o  Ae  assumed  /u  /Ae  ftar/ners/tift. 

V.  j/.  zTlarmon  is  /o  inves/  ibasA,  Jtoo  JAteusand  l^/)o//ars;  ^MercAandise  as  fier  inven/oru  Jtoo  JAousand 
3ive  3lundred  and  3or/u- five  ±3)o//ars  ana1 '  /Air/u.  -  five  v)en/s,  ana  a  nc/e  for  Une  JAtousand  ±3)o//ars  mat/e  /u 
3lc>iry  ffe//s,    en  fan.  43,  49    ,  t/ae    %'an.   4,   49    ,  ana    marina  in/cres/  a/  //ie  ra/e  of  seven  fier  cen/.  fier  annum. 

The  said  partners  are  to  share  the  losses    or    gains  of  the  partnership  business  as  follows :      3i^  98. 

zlour/tm  /aio  //tiro's,    ana*  fe  3.    3iarmon  one  //lira'        of    said    losses      or    gains. 

In  regard  to  time  and  services  to  be  contributed  by  the  partners,   it  is  further  agreed  that     2AA?  zw. 

ZAJur/on  is  /o  devc/e  Aimse/f*  en/ire/u  /o  //ie  /usiness,  ana    is    /o    manaae  ana  conduc/  //te  same  in   accordance  toi/A 
/it's  /es/  iudamen/.  3/  is  a/so  aareed  //to/  Jf-    J.    ^yVarmon  is  no/  /o  /e  reauired  /o  fierform  anu  service  in 

connection  tei/A  said  AusineM. 

3/  is  fur/Aer  aareed  /no/  3c.  3).  zX>ur/on  is  /o  receive  comftensa/ion  for  Ais  services  in  /Ae  sum  of 
f/00  fter  mon/A,  //te  same  /o  Ae  fiaua//e  from  /Ae  funds  of  /Ae  /usiness  ana  Aefore  /Ae  division  of  any.  accrued 
ftrofi/s  Ae/teeen   //te  fiar/ners,    as  Aerein  firovided. 

It  is  also  agreed  that  aside  from  the  profits  and  compensation  heretofore  mentioned,  neither  partner 
is  to  withdraw  from  the  business  any  money  or  other  property,  in  excess  of  his  investment,  except  with 
the  written  consent  of  his  copartner. 

It  is  also  especially  agreed  that  neither  of  the  parties  to  this  contract  shall  sign  or  indorse  any 
bond,  note,  draft,  or  commercial  paper,  nor  sign  any  official  or  other  bond,  or  do  any  other  act  to  create 
a  financial  liability  or  obligation,   without  the  written  consent  of  his   copartner. 

At  the  expiration,  or  in  the  event  of  the  earlier  dissolution  of  this  copartnership,  the  business  and 
property  of  this  firm  may  be  closed  out  by  sale ;  and  after  all  debts  and  liabilities  are  paid  and  discharged, 
the  amount  remaining  shall  be  divided  between  the  partners  in  the  ratio  of  their  respective  interests. 

Witness  our  hands  this         3en/A  day  of  fane  19 

?1d.   fS.    f&VLJlJlori 

J.     y/iLw  )  M  ^>  X^mtm 


Witnesses. 


[95] 


96 


PRODUCE  AND  PROVISION  BUSINESS 


431.  Filing  Articles  of  Agreement. — Fold  your  copy  of  the  "Copartnership  Agreement"  in 
such  a  way  that  the  blank  filing  form  on  the  back  will  be  outside.  Then  fill  out  this  blank  in  accordance 
with  the  form  here  given,  after  which  place  the  document  in  your  Permanent  File. 


H 

-3 


C3 


^ 
^ 
« 


>s 


ON 


V 


z 


2 

0 
O 


432.  Books  of  Original  Entry, — The  books  of  original  entry  for  this  business  are  the  Six- 
column  Journal  and  Sales  Book,  the  latter  being  used  to  record  all  sales  of  merchandise  on  account  or 
for  Bills  Receivable,  as  heretofore.     All  sales  may  be  recorded.     See  par.  344. 

433.  Six-Column  Journal  — This  book  is  a  further  application  of  the  principle  introduced  in  the 
Four-column  Journal;  viz.,  of  so  keeping  the  books  of  original  entry  as  to  save  time  and  labor  in 
posting.  There  are  three  debit  and  three  credit  columns,  which  are  used  respectively  for  cash,  mer- 
chandise, and  sundries,  as  indicated  by  the  headings  in  the  form  of  the  book  on  page  97.  The  sun- 
dries column  only  should  be  posted  daily,  while  the  totals  of  the  other  columns  are  not  to  be  posted 
until  the  books  are  closed.  The  footings  of  the  several  columns  are  to  be  tested  and  carried  forward 
as  previously  instructed  under  "Column  Footings,"  par.  402.     See  also  par.  400,   553,   557,  620. 

434.  Opening  Entry. — After  examining  the  opening  entry  in  the  Six-column  Journal  form  on 
page  97.  make  your  opening  entry  in  your  Six-column  Journal.  No  firm  account  under  the  partnership 
title  is  to  be  opened,  each  partner  being  represented  by  an  individual  stock  account.  Observe  that  the 
merchandise  for  your  own  investment  should  be  entered  in  the  sundries  column,  and  checked  off,  as  it  is 
already  in  your  Ledger,  and,  therefore,  is  not  to  be  posted.  The  merchandise  contributed  by  your  partner 
should  be  entered  in  the  merchandise  column  in  order  that  it  may  be  posted  with  the  total  of  that  column 
at  the  time  of  closing  the  books.  The  pages  of  all  accounts  that  already  appear  in  the  Ledger  must  be 
entered  in  the  folio  column,  as  shown  in  the  form. 

435.  Renewing  Notes. — It  sometimes  becomes  necessary  in  business  to  renew  a  note  when  due 
in  place  of  paying  it.  This  is  done  by  giving  a  new  note  for  the  old  amount.  The  interest  due  at  maturity 
should  always  be  paid  in  renewing  the  note  and  never  be  allowed  to  become  a  part  of  the  new  note.  It  is 
customary  in  the  business  office  when  renewing  a  note  to  write  the  word  '  'renewal' '  on  the  face  of 
the  note,  and  especially  so  if  the  note  has  been  discounted  at  a  bank,  as  doing  this  prevents  rediscounting 
the  note. 

436.  Blank  Indorsements — Notes  and  other  commercial  papers  once  indorsed  in  blank,  will 
remain  payable  to  bearer.  Although  they  may  afterwards  be  endorsed  in  full,  or  otherwise,  it  will  have 
no  effect  whatever,  excepting  that  of  a  blank  indorsement,  unless  all  previous  blank  indorsements  are 
filled  out  so  as  to  make  them  full  indorsements.  The  holder  of  a  paper  indorsed  in  blank  has  a  perfect 
right  to  fill  out  the  indorsement  in  full,  or  otherwise,  so  long  as  he  does  not  increase  the  liability  of  the 
indorser  by  doing  so. 

437.  Interest  on  Notes — No  entry,  whatever,  should  be  made  for  the  interest  on  interest-bearing 
notes  at  the  time  of  receiving  them,  excepting  in  a  case  where  a  note  nas  been  running  some  time  before 
you  received  it;  and  then  an  entry  should  be  made  for  the  accrued  interest  only,  at  the  time  of  receiving 
the  note;  that  is,  for. the  amount  of  interest  due  on  the  note  up  to  the  date  of  receiving  it. 


Cincinnati,  O.,  March  i,  19 


CASH 


MDSE  SUNDRIES      j 


6,325 


50 


5,760 


50 


2,105 


380 


165 


10 


12,251 


10 


2,486 


to 


20 


490 
110 
945 
1,075 
65 
240 


309 


100 


250 
75 


SO 


84 


3,745 


GO 


GO 


cS7 


EXPLANATION 


A  copartnership  for  the  purpose  of 
conducting  a  General  Produce  and  Pro- 
vision Business  has  this  day  been 
formed  between  H.  B.  Burton  and  J. 
C.  Russell,  under  the  firm  name  of  H. 
B.  Burton  &  Co.  The  terms  and  condi- 
tions of  said  copartnership  are  specified 
in  the  Agreement  of  Copartnership, 
which  has  this  diy  been  signed  by  the 
said  partners,  and  a  copy  of  which  has 
been  delivered  to  each. 

H.  B.  Burton  invests  the  following 
resources  and  liabilities : 


Cash,  per  C.  B.  p.  16 

Bills  Rec.  Reg.  No.  42 

Bills  Rec.  Reg.  No.  48 

Lumber,  per  Inv'ry 

G.  J.  Wells  on  acct. 

J.  P.  Jones 

Chattels,  per  Inv'ry 

Bills  Pay,  Reg.  No.  64 

Bills  Pay.  Reg.  No.  73 

W.  D.  Gannon  on  acct. 

J.  J.  Sells  on  acct 

H.  B.  Burton's  net  investment 


J.  C.  Russell  invests  the  following  re- 
sources and  liabilities : 


Cash 

Mdse  ,  per'lnv'ry 

Bills  Rec.  Reg.  No.  54 

J.  C.  Russell's  net  investment 


Expense  Cash 

For  rent  of  store  one  mo.  in  advance. 
Ck.  No.  941. 


Chattels : 

Furniture  and  Fixtures  Cash 

Bought  horse  and  wagon  of  H.  M. 

Culler  for  use  in    the    business, 

$250 ;  also  furniture  and  fixtures, 

as  per  Inv.  No.  185.     Ck.  No.  942. 

Mdse  Bills  Payable 

For  Inv.  No.  143.     Reg.  No.  75. 


CriSri  IVIclsp 

E.  B.  Brown  &  Co.'s  Check  No.  943. 


C.  W.  Cadle  Bills  Payable 

On  acct.  Reg.  No.  76. 

Pwd 


87 


SUNDRIES         MDSE 


265 

450 
1,010 

785 
6,740 


8,176 


380 


M 


17,892 


10 


•10 


GO 


80 


CASH 


165 


165 


100 


325 


10 


10 


425 


[97] 


Tuesday,  March  2,  19 


CASH 

MDSE 

SUNDRIES 

Ex, 

J 

EXPLANATION 

[X, 

SUNDRIES 

_— 

MDSE 

CASH 

12,251 

10 

2,486 
1,204 

20 
20 

3,745 
35 

60 
50 

86 

Brt  Fwd 

Bills  Payable                                       Cash 
Gave  A.    E.    Rice,  Ck.   No.  943,  to 
apply  on  my  60-day  note.     Reg.  No. 
64. 

Mdse                                       Bills  Payable 
Inv.  No.  150.     Reg.  No.  76. 

86 

17,892 

1,204 

80 
20 

165 

10 

425 
35 

50 

720 

50 

350 

210 
5G0 

50 

195 

780 
50 

40 

74 
68 

Cash                                        Mdse  Sales 
O.  C.  Dailey's  Ck.  No.  426. 

Mdse                                      James  Willis 
Inv.  No.  351.     On  acct 

March  3,  19 

Mdse                          Arthur  Armstrong 
Gave  J.  W.  Smith   dft.    No.  33  on 
Arthur  Armstrong  at  3  days'  sight, 
for  Inv.  No.  152. 

Mdse                                       Bill  Payable 
Inv.  No.  153.     Reg.  No.  77. 

Bills  Rec.                                           Mdse 
Rec'd  L.  M.  Spencer's  note  at  5  days 
for  Mdse  as  per  bill  rendered.     Reg. 
No.  49. 

Bill  Rec.                                           Mdse 
Rec'd  S.  B.  Stone's  accept,  at  5  days 
for  Mdse  as  per  bill  rendered.   Reg. 
No.  50. 

G.  E.  Daley                                        Cash 
For  a  cash  loan                  Ck.  No.  944. 

Dr.                        Mdse                         Cr. 
Dr.                        Cash                          Cr. 

74 
68 

350 

210 
560 

50 

50 

50 
00 

720 

195 

780 

50 
40 

50 

12,971 

60 

4,810 

90 

4,806 

4,810 

12,971 

50 
90 
60 

20,217 

1,861 

510 

1,861 

00 

510 

50 

22,589 

00 

22,589 

[98] 


PRODUCE  AND  PROVISION  BUSINESS  99 

SPECIAL  SUGGESTIONS 

438.  Cash  Balance. — See  that  your  cash  is  in  balance  each  night  before  leaving  school.  If  the 
cash  is  out  of  balance,  do  not  engage  in  other  business  transactions  until  the  difficulty  has  been  adjusted. 

439.  Merchandise  in  Stock. — You  are  expected  to  keep  up  your  stock  of  merchandise  by  making 
whatever  purchases  may  be  necessary,  either  at  wholesale,  or  from  other  students,  making  your  own 
arrangements  as  to  terms,  etc  ;  also  take  advantage  of  every  opportunity  to  make  profitable  sales. 

440.  Extra  Transactions. — The  student  should  improve  every  opportunity  to  engage  in  commer- 
cial transactions,  and  shun  no  transactions  that  will  increase  his  knowledge  of  bookkeeping,  even  if  it  does 
involve  a  little  extra  work.  Remember  that  you  "  learn  by  doing,"  and  that  it  is  the  difficult  transactions 
that  give  the  best  training. 

441.  Chattels. — The  term  chattels,  as  used  in  business,  means  property  other  than  real  estate, 
merchandise,  store  fixtures,  etc. ,  and  which  is  used  in  connection  with  the  business,  as  teams  and  drays, 
or  wagons  for  delivery  purposes. 

442.  Furniture  and  Fixtures. — This  term  implies  any  property  used  in  the  store  or  office  for  the 
convenience  of  the  business,  as  desks,  chairs,  stoves,  counters,  etc. 

443.  Loan. — When  instructed  to  secure  a  loan  of  $5,000  from  the  bank  by  giving  your  firm's 
note,  without  interest,  secured  by  an  indorser,  pursue  either  of  the  following  plans: 

1.  Write  the  note  in  favor  of  the  bank,  payable  ten  days  after  date,  having  it  indorsed  by  a  student 
who  is  willing  to  secure  its  payment  by  indorsement;  then  deliver  it  to  the  bank  for  discount,  having  the 
proceeds  placed  to  the  credit  of  your  firm.  Also,  enter  the  proceeds  of  the  same  in  your  Banking  Ledger, 
the  same  as  a  deposit.     The  Journal  entry  would  be  "Cash  and  Int.  and  Dis.  to  Bills  Payable." 

2.  Find  a  student  who  is  willing  to  indorse  your  firm's  note  for  $5,000.  Write  a  note  in  his  favor  for 
ten  days  after  date;  then  have  the  student  indorse  it  in  blank,  or  to  your  order,  then  discount  it  as  previ- 
ously instructed. 

444.  Notes,  Where  Payable. — Business  men  often  make  their  notes  payable  at  a  bank  where  they 
have  money  on  deposit,  instructing  the  banker  to  pay  them  at  maturity,  and  charge  the  same  to  their  bank 
account.  Notes  are  frequently  written  without  any  specification  as  to  where  they  are  to  be  paid;  in  the 
absence  of  such  specification,  the  general  rule  is  that  they  are  payable  at  the  place  where  they  are  dated. 

445.  In  this  business,  all  notes  made  payable  at  the  bank  are  to  be  paid  by  the  banker,  and  without 
receiving  a  check  from  the  maker  of  such  notes,  unless  otherwise  instructed  by  your  teacher. 

446.  When  the  banker  pays  your  note,  he  will  send  you  a  notice  to  that  effect,  and  will  return 
your  note  with  the  paid  checks  when  he  balances  your  Pass  Book.  Upon  receiving  notice  from  the  bank 
that  he  has  paid  your  note,  make  the  same  entry  that  you  would  have  made,  had  you  paid  the  note  your- 
self; also  make  an  entry  on  the  credit  side  of  the  Banking  Ledger,  writing  the  word  "Note' '  in  the  ex- 
planation column,  and  the  number  and  amount  of  the  note  in  the  proper  columns,  as  in  the  case  of  a  check. 

447.  Returned  Checks. — It  sometimes  happens  in  the  course  of  business  that  your  own  check  is 
returned  to  you  without  being  cashed  or  deposited  at  the  bank.  When  this  occurs,  debit  Cash  as  usual, 
and  then  make  an  entry  on  the  debit  side  of  the  Banking  Ledger  with  explanation;  thus,  "Ck.  48,  returned 
75.25."      See  page  11. 

SHIPMENTS 

448.  A  Shipment,  or  Consignment,  is  a  quantity  of  goods  shipped  or  delivered  to  a  commission 
merchant,  or  other  person,  to  be  sold  on  commission. 

c  449.  The  terms  shipment  and  consignment  may  be  used  interchangeably  in  all  cases  except  when 
we  are  making  shipments  and  receiving  consignments  to  be  sold  on  commission,  in  which  case  shipment 
applies  to  the  goods  that  we  ship,  and  consignment  to  those  we  receive.  '  • 

450.  Parties. — The  person  making  the  shipment  is  known  in  the  transaction  as  the  Shipper  or 
Consignor.     The  Consignee  is  the  commission  merchant,  agent,  or  factor  to  whom  the  goods  are  shipped. 

451.  Commission. — As  compensation  for  his  services  in  disposing  of  the  shipment,  the  consignee 
receives  a  certain  percentage  of  the  sum  received  for  the  goods.  This  compensation  is  called  "commis- 
sion." In  addition  to  his  charges  for  "commission,"  the  consignee,  before  remitting  the  proceeds  of  any 
consignment,  deducts  all  charges  foi  freight,  drayage,  cooperage,  insurance,  etc. 

452.  Proceeds. — The  amount  remaining  after  the  charges  and  commission  have  been  deducted  is 
called  the  "Net  Proceeds,"  which  belongs  to  the  person  who  made  the  shipment,  being  the  net  amount 
realized  by  the  consignor  for  the  goods  shipped.  If  this  sum  is  greater  than  the  cost  of  the  goods,  the 
shipment  will  show  a  gain;  if  less,  it  will  show  a  loss. 


100  PRODUCE  AND  PROVISION  BUSINESS 

453.  Reasons  for  Hairing  Shipments — Shipments  are  made  for  either  of  two  general  reasons: 

1.  The  owner  of  the  goods  may  have  little  or  no  opportunity  for  home  trade  in  the  article  shipped. 

2.  By  shipping  the  goods,  the  owner  may  make  quicker  sales  and  better  profits  than  if  he  depended 
upon  the  home  market. 

454.  Shipment  Account. — A  separate  account  is  kept  with  each  shipment,  in  order  that  you  may 
determine  the  net  gain  or  loss  on  any  shipment.  The  shipments  are  numbered  as  they  are  made,  the  titles 
of  the  accounts  being,  "Shipment  No.  1,"  "Shipment  No.  2,"  etc.,  followed  by  the  name  of  the  consignee. 
In  making  the  sales  book  entry,  give  the  consignee's  name  and  address.  For  form  of  entry  see  sales  book 
entry  No.  3,  page  57.  If  a  Sales  Book  is  not  used,  make  a  journal  entry,  "Shipment  No.  1  (Con- 
signee's name)  to  Mdse. ,"  followed  by  the  required  explanation.  In  opening  the  ledger  account,  give 
the  name  and  address  of  the  consignee,  as  in  the  sales  book  entry.       Read  par.  344. 

455.  The  shipment  should  be  charged  with  the  actual  cost  of  the  merchandise;  that  is,  the  invoice 
cost,  less  any  discounts  that  were  allowed.  The  shipment  should  also  be  charged  with  any  expenses  in- 
curred in  connection  with  it,  as  drayage,  prepaid  freight,  boxing,  etc. 

450.  Shipping  Receipt. — Whenever  goods  are  shipped  by  railroad  or  other  means  of  general 
transportation,  it  is  customary  for  the  shipper  to  make  out  a  Shipping  Order  and  a  Shipping  Receipt,  the 
former  being  signed  by  the  shipper  and  delivered  to  the  transportation  company's  agent,  and  the  latter 
being  signed  by  the  company's  agent  and  retained  by  the  shipper,  who  forwards  it  by  mail  to  the  "con- 
signee," or  person  to  whom  the  goods  are  shipped.    .  This  Shipping  Receipt  is  also  called  a  Bill  of  Lading. 

457.  Both  the  Shipping  Receipt  and  the  Shipping  Order  contain  a  description  of  the  articles  with 
number  and  weight  of  packages,  consignee's  address,  etc. 

458.  The  Shipping  Receipt  and  the  Shipping  Order  are  usually  printed  on  the  same  page,  being 
bound  in  tablet  or  book  form,  and  supplied  by  the  railroad  companies  to  shippers  free  of  charge. 

459.  Shipping  Invoice. — When  you  are  directed  to  make  a  shipment,  select  the  merchandise 
cards  and  prepare  an  invoice  of  them,  which  invoice  is  to  be  sent  to  the  consignee.  In  preparing  a  ship- 
ping invoice  omit  prices  and  amounts,  as  the  consignee  has  nothing  to  do  with  these.  Simply  give  a  list 
of  the  kind  and  quantities  of  the  goods  shipped. 

SHIPPING   IISTVOICE 

INVOICE  OF  MERCHANDISE  shipped  %    ^-^(TO^Wy  ^  (  ^ . 
end  consigned  to J^^^/^Z^2^ of >s^4r^^^? „    (J^^Lii^-^ 


to  be  sold  on  commission. 


£0 

2-0 


460.  How  to  Make  a  Shipment. — In  preparing  a  shipment  for  school  purposes,  always  enclose 
the  merchandise  cards  in  an  envelope  or  in  a  neatly  prepared  package,  giving  the  name  and  address  of  the 
person  to  whom  the  goods  are  shipped,  the  same  as  in  the  following  example:  "Geo.  D.  Hunter,  Sacra- 
mento, Cal.  Shipped  by  John  Smith,  Oakland."  Write  a  letter,  enclosing  the  shipping  invoice  of  the 
goods  and  the  shipping  receipt.     Be  sure  to  copy  your  letter  in  the  Letter  Copying  Book. 

461.  Note. — It  should  be  clearly  understood  that  the  goods  which  you  buy  and  have  shipped  to 
you,  also  the  goods  you  sell  and  ship  to  others,  are  not  shipmeyits  in  the  meaning  of  the  term  as  here 
used. 

462.  How  to  Close  a  Shipment. — When  the  commission  merchant  renders  an  Account  Sales  and 
the  Net  Proceeds  of  the  shipment,  make  an  entry  in  the  following  form:  "Cash  to  Shipment  No.  1,  (Con- 
signee's name).  For  net  proceeds  by  N.  Y.  draft."  If  the  Account  Sales  is  rendered  without  the  proceeds, 
debit  the  commission  merchant  and  credit  Shipment  No.  1  (Consignee's  name),  making  the  following 
explanation:  "For  proceeds  of  Shipment  No.  1,  as  per  Account  Sales  of  June  10."  When  he  remits  the 
proceeds,  debit  Cash  and  credit  him  for  the  amount.  Shipment  accounts  should  stand  open  until  the  books 
are  closed,  at  which  time  they  should  be  closed  to  the  Loss  and  Gain  account. 


PRODUCE  AND  PROVISION  BUSINESS  ;         .   !     &"'**£ 

463.  Outstanding  Shipment. — All  shipments  for  which  the  proceeds  have  not  been  received  at 
the  time  of  closing  the  books,  must  be  regarded  as  resources.  They  should  be  inventoried  upon  a  reason- 
able estimate  of  what  is  expected  to  be  realized  on  them,  taking  into  consideration  the  market  price  (which 
may  be  either  above  or  below  or  at  the  actual  cost  price),  the  condition  of  the  goods,  and  the  probable  ex- 
penses of  commission,  freight,  etc. 

464.  Freight,  Drayage,  and  Express. — In  shipping  goods  that  have  been  sold,  extra  expenses 
are  often  involved  for  labor,  drayage,  freight,  express,  casing  the  goods,  etc.  These  charges  are  entered 
on  the  bill  and  charged  to  the  customer.  The  charges  for  casing  and  drayage  may  be  made  for  our  own 
labor,  and  not  for  cash  paid  out.  In  this  case,  we  credit  Merchandise  for  the  charges,  which  is  the  com- 
mon and  convenient  custom.  It  is  entirely  proper  to  credit  Merchandise  for  charges  of  this  character  pro- 
vided we  debit  Merchandise  when  we  pay  such  charges. 

465.  Some  merchants  who  desire  a  more  detailed  exhibit  of  the  expenses  connected  with  their  busi- 
ness, open  accounts  with  the  different  items  of  expense  on  merchandise,  as  freight,  drayage,  express,  etc. , 
instead  of  charging  such  expenses  directly  to  the  Merchandise  account.  In  this  course,  whenever  freight, 
drayage,  or  express  is  paid,  it  is  charged  directly  to  the  'Freight,  Drayage,  and  Express"  account  instead 
of  being  charged  to  the  Merchandise  account,  as  heretofore  explained.  At  the  end  of  the  business,  the 
"Freight,  Drayage,  and  Express"  account  should  be  closed  to  the  Merchandise  account,  and  not  to  the 
Loss  and  Gain  account. 

466.  Some  bookkeepers  and  authors  of  bookkeeping  have  claimed  that  these  charges  should  be 
charged  to  the  Expense  account.     Before  deciding  this  matter,  let  us  consider  a  practical  illustration. 

467.  Suppose  a  San  Francisco  merchant  should  order  from  New  York  a  case  of  one  hundred  straw 
hats  at  $5  net,  paying  the  following  charges  on  them:  in  New  York  for  packing  and  casing  $1,  drayage 
$.50,  advance  freight  $2.50;  in  San  Francisco  to  the  R.  R.  Co.,  for  back  freight  charges  $1.50,  drayage 
$.50  .     Under  these  circumstances,  what  would  be  the  cost  price  of  your  hats,  five  cents  or  eleven  cents? 

Clearly  it  would  be  eleven  cents. 

Now,  should  your  Merchandise  account  be  charged  with  $5  or  with  $11? 

It  should  certainly  be  charged  with  $11  as  that  is  the  actual  cost  of  the  goods. 

Should  you  sell  the  hats  for  twenty  cents  each,  what  have  you  gained  on  the  invoice,  $9  or  $15? 

You  could  hardly  fail  to  decide  that  you  have  gained  $9. 

468.  Suppose  you  should  afterward  sell,  for  fifty  cents,  the  box  that  the  hats  were  shipped  in,  and 
charge  twenty-five  cents  for  delivering  it  with  your  own  team,  should  you  not  debit  Cash  and  credit 
Merchandise  for  the  seventy-five  cents?     You  would  certainly  be  justified  in  doing  this. 

469.  As  the  cost  of  the  box  has  been  charged  to  the  Merchandise  account,  it  would  therefore  be 
entirely  incorrect  to  credit  Expense  for  the  seventy-five  cents. 

CONDUCTING  BUSINESS  BY   MEANS  OF  CORRESPONDENCE 

470.  General  Suggestions. — Throughout  the  remainder  of  this  course,  the  student  will  be  fre- 
quently directed  to  transact  certain  business  by  means  of  letters.  To  learn  to  do  this  in  a  businesslike 
manner  is  a  very  important  part  of  a  commercial  training. 

471.  It  is  not  the  purpose  of  these  instructions  to  treat  in  detail  the  subject  of  business  correspond- 
ence ;    for  information  on  this  subject,  the  student  should  consult  some  good  work  on  letter-writing 

473.  It  is  important  that  you  should  write  all  letters  neatly,  plainly,  and  in  correct  form  Every 
letter  and  enclosure  should  be  prepared  with  care. 

473.  A  large  portion  of  modern  business  is  conducted  by  means  of  correspondence,  and  it  is  vitally 
important  that  the  student  should  learn  to  conduct  such  business  readily  and  accurately. 

474.  The  letters  should  be  brief,  explicit,  and  businesslike,  and  all  letters  received  should  be 
answered  promptly. 

475.  In  answering  any  letter,  refer  to  the  date  and  subject  matter  of  the  letter  you  are  answering; 
thus:  "Referring  to  your  favor  of  the  sixth,  regarding  the  draft  on  Mr.  Wilson,  I  wish  to  inform 
you,"   etc. 

476.  In  delivering  and  receiving  your  mail,  you  should  conform  strictly  to  the  special  arrange- 
ments of  your  school. 

477.  Oral  Communication. — Do  not,  under  any  circumstances,  communicate  orally  with  any  one 
regarding  any  matter  that  is  to  be  adjusted  by  correspondence. 

478.  With  Whom  to  Correspond. — Unless  otherwise  directed,  do  not  write  business  letters  to  stu- 
dents who  have  not  advanced  in  the  course  as  far  as  the  Produce  and  Provision  Business. 


:102':;  : 


PRODUCE  AND  PROVISION  BUSINESS 


4*79.  Mail  Orders. — In  ordering  goods  by  letter,  if  the  order  consists  of  but  few  items,  it  may  be 
included  in  the  body  of  the  letter.  See  accompanying  letter.  If,  however,  the  order  consists  of  many 
items,  it  is  advisable  to  write  it  upon  a  separate  sheet,  and  enclose  it  in  the  letter.  Firms  that  receive 
many  orders  by  mail  usually  supply  their  customers  with  special  order  sheets  for  this  purpose.  Ask  your 
teacher  what  he  wishes  you  to  do  about  enclosing  orders. 


^G^2>^    &%yy    s?z<^>, 


&-0  sfy  ^^^^Cz^>a^^ 


M 


3#  ,.  ^ 


^f^z^y  s^fr&*^i?~&€<wr    ^zy^t^ 


/a 


^Z-tz^S  ' ^2-^tZfr£^^Jir7~ 


^^-z>c^L^  ^^t^Zy, 


480.  Postage. — College  postage  stamps  should  be  used  on  all  letters. 

481.  Enclosures. — Lay  all  enclosures,  as  checks,  notes,  etc.,  across  the  upper  part  of  your  letter 
and  fold  with  the  letter. 

482.  Shipping  Goods. — In  shipping  goods  to  a  customer  with  whom  you  are  dealing  by  corre- 
spondence, prepare  the  goods  for  shipment  as  directed  in  "How  to  make  a  Shipment."  Fill  out 
a  Shipping  Receipt  as  directed  and  deliver  it  with  the  goods  to  your  freight  agent,  and  have  him  sign 
it;  then  write  a  letter  to  your  customer,  acknowledging  the  receipt  of  his  order,  also  the  remittance, 
if  any.     Enclose  in  the  letter  a  bill  of  the  goods,  also  the  Shipping  Receipt. 

483.  Filing  Letters. — All  letters  received  should  be  kept  on  permanent  file.  With  all  careful 
business  men,  this  is  an  indispensable  matter,  as  the  letters  may  be  wanted  for  reference.  There  are  many 
devices  for  filing  letters.  In  the  absence  of  any  special  filing  device,  keep  the  letters  in  your  Permanent 
File. 

484.  Filing  Papers,  etc. — Be  particular  to  file  every  business  paper  that  comes  into  your  posses- 
sion. 


PRdDUCE  AND  PROVISION  BUSINESS  103 

485.  Sale  Subject  to  Draft. — To  sell  goods  subject  to  a  draft  means  that  the  goods  are  sold  on 
account  with  the  understanding  that  the  person  selling  them  has  a  right  to  draw  a  draft  on  the  buyer  when- 
ever he  desires  to  do  so,  regardless  of  time,  unless  it  is  specified  in  the  agreement  that  the  buyer  is  to 
have  a  certain  number  of  days,  before  the  account  becomes  subject  to  a  draft.  In  your  work  hereafter,  it 
is  understood  that  all  goods  bought  or  sold  on  account  are  sold  subject  to  draft. 

486.  Collections. — It  is  customary  for  business  men  to  make  collections  outside  of  their  own  city 
by  drawing  drafts,  and  leaving  them  at  the  bank  for  collections.  It  is  not  advisable  to  make  entries  for 
such  drafts,  until  the  collections  have  been  made,  as  payment  is  sometimes  delayed,   and  may  be  refused. 

487.  On  drawing  a  draft  on  account,  it  is  advisable  to  make  a  lead-pencil  memorandum  in  the 
Ledger,  giving  the  person  on  whom  you  have  drawn,  credit  for  the  amount  of  the  draft.  This  will  prevent 
the  drawing  of  a  second  draft,  or  the  rendering  of  a  statement  of  account  until  after  a  report  has  been  made 
on  the  first  draft. 

488.  The  amount  charged  by  banks  for  the  collection  of  notes,  drafts,  acceptances,  etc.,  depends 
upon  the  amount  to  be  collected,  the  necessary  correspondence,  etc. ,  and  varies  from  }&  to  }£  of  one  per 
cent. 

489.  Collection  Account — A  Collection  account  should  be  kept  with  the  various  amounts  paid  to 
banks  or  to  collecting  agencies,  for  the  collection  of  accounts,  notes,  drafts,  and  other  commercial  papers. 
In  case  there  are  but  few  items  of  this  kind,  this  account  may  be  dispensed  with,  and  these  items  charged 
to  the  Interest  and  Discount  account.     In  this  course  you  are  to  keep  a  Collection  account. 

490.  Exchanging  Mdse. — In  mercantile  business  it  is  often  convenient  to  exchange  one  "kind  of 
merchandise  for  another  kind.  Thus,  in  a  country  store,  it  is  common  to  buy  butter,  eggs,  poultry,  and 
other  products,  the  buyer  paying  for  the  same  in  goods  from  the  store.  In  these  cases,  as  only  the 
merchandise  account  is  affected,  an  entry  is  unnecessary,  although  if  it  were  thought  advisable  in  any  case, 
a  simple  memorandum  of  the  transaction  might  be  recorded. 

491.  Fictitious  Payee. — The  maker  of  a  check  may  make  the  instrument  payable  to  "self"  or  to 
"cash,"  or  may  use  any  other  term  instead  of  naming  the  payee;  however,  all  commercial  paper  made 
payable  to  a  fictitious  payee  is  payable  to  bearer;  that  is,  if  a  check  is  made  payable  to  cash,  it  is  trans- 
ferable without  indorsement.     If  no  payee  is  mentioned  at  all,  the  instrument  is  void. 

492.  Antedate. — To  Antedate  a  paper  is  to  give  it  a  date  preceding  the  date  upon  which  the  paper 
is  drawn.  Thus,  if  a  note  or  other  paper  drawn  on  June  1  were  to  be  antedated  30  days,  it  would  bear  the 
date  May  2.  Unless  by  special  agreement,  no  one  but  the  maker  of  an  obligation  has  the  right  to  ante- 
date it. 

493.  Postdate. — To  Postdate  a  paper  is  to  give  it  a  date  later  than  that  upon  which  it  is  drawn. 
Thus,  if  a  note  or  other  paper  given  on  June  1  were  postdated  30  days,  it  would  bear  the  date  July  1. 
Circumstances  often  arise  when  it  is  desirable  to  postdate  a  commercial  paper. 

494.  For  example,  a  check  may  be  postdated  when  issued  to  a  traveling  agent  in  payment  of  a 
certain  article  that  he  has  sold,  with  the  understanding  that  no  other  sales  of  the  same  article  are  to  be 
made  in  the  same  city  within  a  specified  time.  This  gives  the  purchaser  of  the  goods  a  chance  to  stop  the 
payment  of  the  check  if  the  agent  violates  the  contract,  as  the  check,  of  course,  could  not  be  collected 
previous  to  the  day  of  its  date.     Only  the  drawer  of  a  paper  has  a  right  to  postdate  it. 

ACCOMMODATION  PAPERS 

495.  An  Accommodation  Paper  is  a  note  or  other  negotiable  paper  that  is  loaned  to  a  person  who 
wishes  to  use  it  in  raising  money  or  paying  a  debt.  Papers  and  indorsements  of  this  character  are  merely 
for  the  accommodation  of  the  borrower,  and  are  not  given  for  a  bona  fide  consideration.  They  generally 
consist  of  notes,  drafts,  and  checks;  although  bills  of  exchange  and  orders  may  be  used.  An  accommoda- 
tion paper  may  consist  merely  of  an  acceptance  or  an  indorsement. 

496.  The  person  who  receives  an  accommodation  paper,  or  indorsement,  and  uses  it,  is  expected 
to  pay  it  at  maturity,  although  if  he  does  not  pay  it,  the  person  who  accommodated  him  with  his  signature 
will  have  it- to  pay.  The  person  who  received  it  as  an  accommodation  cannot  collect  it  at  maturity,  but  it 
may  be  collected  by  any  person  to  whom  it  has  been  transferred  in  good  faith,  and  for  a  valid  consideration. 


104 


PRODUCE  AND  PROVISION  BUSINESS 


497.  Exchange. — Exchange  is  the  charge  made  by  a  bank  for  issuing  a  draft,  or  bill  of  exchange. 
It  may  be  a  small,  regular  charge  (from  10  to  50  cents,  according  to  the  amount  of  the  bill),  or  (especially 
in  the  case  of  a  large  bill)  it  may  be  a  certain  per  cent,  usually  y%  %  of  the  face  of  the  bill. 

498.  If  a  check  is  given  in  payment  for  a  bank  draft,  or  bill  of  exchange,  it  should  be  made  out  for 
the  face  of  the  bill  plus  the  exchange.  If  there  are  many  charges  for  exchange,  an  account  is  kept  with 
"Exchange."  When  there  are  but  few  charges  for  exchange,  they  may  be  charged  to  "Collections,"  or  to 
"Interest  and  Discount." 

499.  In  your  present  work  you  will  keep  an  Exchange  account.     For  journal  entries,  see  page  88. 

500.  Bills  of  Exchange. — A  Bill  of  Exchange  is  an  order  for  money,  issued  by  a  bank  upon  some 
other  bank  in  a  distant  city  or  country. 

501.  In  effect,  a  Bill  of  Exchange  is  like  an  ordinary  bank  draft,  but  it  is  sometimes  made  out  in 
"sets"  of  two  or  more- 

502.  Bills  of  Exchange  are  either  Foreign  or  Domestic,  according  as  they  are  drawn  upon  a  bank 
in  a  foreign  country,  or  upon  a  bank  in  the  same  country  in  which  they  are  issued.  Thus  a  bill  drawn 
in  New  York  upon  a  bank  in  Londoi  or  Paris,  would  be  a  "foreign  bill;"  but  if  drawn  in  New  York  upon 
a  bank  in  New  Orleans  or  San  Francisco,  it  would  be  called  a  "domestic  bill.' '  Domestic  bills  are  also 
known  as  "inland  bills,"  but  strictly  speaking,  and  especially  in  a  legal  sense,  bills  of  exchange  drawn  in 
one  State  and  payable  in  another  are  foreign  bills.     Domestic  bills  are  also  known  as  inland  bills. 

503.  The  ordinary  form  of  a  set  of  exchange  is  herewith  given.  The  bills  may  be  drawn  payable 
"at  sight"  or  at  a  specified  number  of  days  after  date,   or  at  a  given  number  of  days  "after  sight." 


HIBERNIA    BANK 


gxrhraitgB  fur  /*.  000  S<™  f®i°aneiseo,  (§>al.,_^k^iLi9      Nn.  S<¥5 

<P\t  sight   of  this  f®ipst  of  ^xehange   (^eeon5   unpaid)   pa\j  to  the   opdep  of 

^alue  received,  and  eharqe  to  the  aeeount  of  the  p\ibepnia  j^ank. 


Zo  the  THition  Banfe, 
CfMcago,  III. 


€&. 


vat/el-itm , , 


•      HXBE^RNIiV     BANK 

gxrhraitgE  f nr  //*  000  S™  Ppana\*&a,  @q!.;  Jt*n.  <?,  t9      flg.  S#6 

^\t  sight  of  this  <^>eeond  of  4l)xehange   (f®ii°st   unpaid)   pay  to  the  opder>  of 

^)alue  peeei<e>ed,  and  ehapge  to  the  aeeount  of  the  p\ibepnia  d^ank. 


Zo  tfoe  Xllnion  Banfe, 
Cbicaoo,  til. 


''£0.     ©■ 


at'ieM&n, 


Cashier. 


504.  Suspense  Account. — This  is  an  account  used  by  the  wholesale  merchant  and  retailer  who  has 
an  extensive  retail  trade  by  mail,  as  it  sometimes  happens  that  an  order  is  received  for  goods,  or  a  remit- 
tance on  account  is  received  from  someone  who  has  neglected  to  sign  or  inclose  his  letter.  This,  of  course, 
makes  it  impossible  for  the  merchant  to  fill  the  order  or  give  the  proper  credit  on  account.  Under  these 
circumstances,  he  is  obliged  to  debit  Cash  and  credit  Suspense  Account,  and  wait  for  someone  to  complain 
about  not  receiving  his  goods,  or  not  having  a  sufficient  credit  on  account.  In  this  account  may  be  entered 
all  sums  received  or  disbursed  until  their  proper  place  on  the  books  can  be  determined. 


PRODUCE  AND  PROVISION  BUSINESS 
CERTIFICATE  OF  DEPOSIT 


105 


505.  A  Certificate  of  Deposit  is  a  written  acknowledgment  of  a  bank  that  it  has  received, 
from  the  person  named  in  the  certificate,  a  sum  of  money  on  deposit,  subject  to  withdrawal  only 
on  surrendering  the  certificate.  Some  banks,  however,  issue  certificates  of  deposit,  and,  as  an 
accommodation,  permit  the  holders  to  make  withdrawals,  the  same  being  indorsed  on  the  certificate. 
The  banker  makes  no  charge  for  a  certificate  of  deposit. 


U.-&L 


Vrc  </0,  • 


?— 


To  j^yg//w* 


$  «***•• 


A.  00 

$   JJS  — 


/ntrwptrt 


CERTIFICATE 

OF 

DEPOSIT 


MERCHANTS     BiVJVK: 

.has  deposited  in  this  Bank  ) 


<&  ©#   $*a//fW 


Not  Subject  to  Check.  7  payab/e  to  the  order  of_ 


&  ©£  &«&* 


no.  ^ 


on  return  of  this  certificate  properly  indorsed. 


?fft€4 


Cashier. 


~~J 


MISCELLANEOUS    INVENTORIES 


Resource  Inventories. — The  inventories  at  the  close  of  this  business  may  include  a  number 
of  items  other  than  that  of  merchandise.  Among  these  may  be  chattels,  furniture  and  fixtures,  out- 
standing shipments,  unexpired  rent,  accrued  interest  on  accounts  receiveable,  etc.  When  making  out 
the  Balance  Sheet  all  resource  inventories  must  appear  in  red  ink  in  the  resource  column;  and  in  clos- 
ing the  books  they  must  be  entered  on  the  credit  side  of  their  respective  accounts  as  Bal.  Invry,  in 
red  ink;  and  after  the  accounts  are  ruled  the  red  ink  Bal.  Invry  must  be  brought  down  below  the 
ruling  on  the  debit  side,  in  black  ink. 

506.  Interest  Inventory  on  Accounts  Receivable. — In  order  to  ascertain  the  interest  in- 
ventory on  accounts  receivable,  compute  the  interest  on  all  interest-bearing  papers  or  accounts  from 
their  dates  to  the  date  of  taking  the  inventory. 

Liability  Inventories. — These  may  consist  of  unpaid  rent,  accrued  interest,  or  any  debt  that 
has  been  incurred  and  for  which  no  entry  has  been  made  on  the  books  at  the  time  of  taking  the 
inventory.  When  making  out  the  Balance  Sheet  all  liability  inventories  must  appear  in  red  ink  in 
the  liability  column  of  the  Balance  Sheet,  and  in  closing  the  books  must  be  entered  on  the  debit  side 
of  their  respective  accounts  as  Bal.  Invry,  in  red  ink;  and  after  the  accounts  are  ruled  the  red  ink 
Bal.  Invry  must  be  brought  down  below  the  ruling  on  the  credit  side,  in  black  ink. 

507.  Interest  Inventory  on  Accounts  Payable. — To  obtain  the  Interest  Inventory  on 
Accounts  Payable,  compute  the  interest  on  all  outstanding  interest-bearing  papers  or  accounts  from 
their  dates  to  the  date  of  taking  the  inventory. 

508.  Discount  Inventory. — Discount  is  a  deduction  from  the  face  of  a  commercial  paper  or 
an  account  paid  before  maturity,  or  for  money  advanced  either  by  us  or  to  us  before  the  paper  or 
account  is  due. 

Interest  and  Discount  and  Interest  Inventory  and  Discount  Inventory  are  often  kept  under  one 
account  called  Int.  and  Dis. 

Opening  the  Account. — In  entering  Discount  Inventories,  discount  off  resource  accounts  will 
have  to  be  entered  on  the  credit  side  as  Bal.  Invry,  in  black  ink,  because  it  must  stand  as  an  offset 
or  a  deduction  from  the  face  of  the  paper  or  account  that  gave  rise  to  the  discount.  Discount  off 
liability  accounts  will  have  to  be  entered  on  the  debit  side,  as  Bal.  Invry,  in  black  ink,  because  it  must 
stand  as  an  offset  or  deduction  from  the  face  of  the  paper  or  account  that  gave  rise  to  the  discount. 

Closing  the  Account. — In  closing  the  account  the  black  ink  Bal.  Invry  (if  any)  standing  on 
the  debit  side,  together  with  any  other  discount  inventory  off  liability  accounts  since  the  account  was 
opened,  will  have  to  be  entered  on  the  credit  side,  as  "Bal.  Invry,"  in  red  ink;  and  the  black  ink 
Bal.  Invry  (if  any)  standing  on  the  credit  side,  together  with  any  other  discount  inventory  off  resource 
accounts  since  the  account  was  opened  will  have  to  be  entered  on  the  debit  side,  as  Bal.  Invry,  in  red 
ink,  because,  an  account  has  to  show  that  all  debts  due  to  it,  or  from  it,  are  discharged  before  the 
account  can  show  either  loss  or  gain  and  the  red  ink  entries  represent  that  all  debts  due  to  it  and 
from  it  have  been  discharged.    See  Closing  Nominal  Accounts,  p.  35,  Journalizing  Inventories,  p.  37. 


106 


PRODUCE  AND  PROVISION  BUSINESS 


Illustration  of  Opening  and  Closing  the  Account. — The  accompanying  illustration  shows  how 
the  Interest  and  the  Discount  inventories  are  entered  in  the  Int.  and  Dis.  account,  both  in  opening 
and  in  closing  the  account. 

INTEREST  AND  DISCOUNT 


19 

Nov 

1 

Bal.  Invry 

IB 

1 

18 

40 

19 

Nov. 

1 

Bal.  Invry 

IB 

1 

8 

20 

10 

C 

4 

5 

20 

12 

C 

5 

12 

30 

Bal.  Invry 

10 

40 

22 

C 

12 

9 

20 

30 

Loss  and  Gain 

12 

16 

30 

30 

Bal.  Invry 

20 

go 

50 

30 

50 

30 

19 

Dec. 

1 

Bal.  Invry 

20 

90 

19 

Dec. 

1 

Bal.  Invry 

10 

40 

EXPLANATION  OF  ILLUSTRATION 

The  black  ink  Bal.  Invry  of  $18.40,  entered  on  the  resource  side  of  the  account  is  the  Bal.  Invry 
entered  from  the  Inventory  Book  (or  sheet)  at  the  opening  of  the  account  on  November  1.  And  the 
black  ink  Bal.  Invry  of  $8.20,  entered  on  the  liability  side  is  the  Bal.  Invry  entered  from  the  Inven- 
tory Book  (or  sheet)  at  the  opening  of  the  account,  November  1.  The  black  ink  Bal.  Invry  of  $18.40 
on  the  debit  side  and  the  black  ink  Bal.  Invry  of  $8.20  on  the  credit  side,  then  represent  the  opening 
of  the  account. 

On  the  10th  of  the  month,  we  paid  $5.20  for  interest  (or  for  Int.  and  Dis.)  as  shown  by  the  post- 
ing of  $5.20  from  the  Cash  Book,  on  that  date.  On  the  12th  of  the  month  $12  was  paid  us  for  in- 
terest (or  Int.  and  Dis.)  as  shown  by  the  posting  from  the  Cash  Book,  on  that  date.  Again  on  the 
2 2d,  $9.20  was  paid  to  us,  for  interest  (or  for  Int.  and  Dis.)  as  shown  by  the  posting  from  the  Cash 
Book  on  that  date. 

At  the  time  of  closing  the  account,  November  30,  $2.50  additional  interest  had  accrued  on  re- 
source accounts,  making  a  total  Bal.  Invry  at  that  time  of  ($i8.4o  +  $2.5o)  $20.90.  This  total  it  will 
be  noted,  is  entered  on  the  liability  side  as  Bal.  Invry  $20.90,  in  red  ink.  The  red  ink  entry  of  $20.90 
on  the  liability  side  then  represents  the  interest  on  resource  accounts  (or  the  discount  off  liability 
accounts- or  both)'  as  having  been  paid  to  us.  This  will  be  plain  if  a  Journal  entry  is  made  on  journal 
paper  of  Cash  to  Int.  and  Dis.  $20.90.  From  this  entry  it  will  be  seen  that  the  Int.  and  Dis.  item 
would  post  to  the  credit  side  of  the  account. 

At  the  time  of  closing  the  account,  November  30,  $2.20  additional  interest  had  accrued  on  lia- 
bility accounts,  making  a  total  of  ($8.2o+$2.2o)  $10.40.  This  total,  it  will  be  seen,  is  entered  on  the 
resource  side  as  "Bal.  Invry  $10.40,"  in  red  ink.  The  red  ink  entry  of  $10.40  on  the  resource  side 
represents  the  interest  on  liability  accounts  (or  the  discount  off  resource  accounts  or  both)  as  having 
been  paid  by  us.  This  will  be  made  plain  if  a  Journal  entry  is  made  on  journal  paper  of  Int.  and., 
Dis.  to  Cash,  $10.40.  From  this  entry  it  will  be  seen  that  the  Int.  and  Dis.  item  would  post  to  the 
debit  side  of  the  account.  These  red  ink  Bal.  Invry  entries,  then,  represent  that  all  interest  and  dis- 
count due  us  has  been  paid  to  us,  and  that  all  interest  and  discount. due  from  us  has  been  paid  by  us. 
We  are  therefore  now  ready  to  find  the  loss  or  the  gain  on  this  account.  The  difference  between  the 
two  sides,  $16.30,  is  then  closed  into  the  Loss  and  Gain  account,  in  red  ink.  The  account  is  ruled, 
and  the  red  ink  resource  "Bal.  Invry  of  $20.90,"  is  brought  down  below  the  ruling  on  the  resource 
side,  in  black  ink;  and  the  red  ink  liability  Bal.  Invry  is  brought  down  below  the  ruling  on  the  lia- 
bility side,  in  black  ink.  This,  then,  represents  the  closing  of  the  account  and  the  bringing  down 
of  the  balance  inventories  preparatory  to  starting  out  on  the  new  month. 

Other  Inventories. — From  the  illustration  and  the  description  of  how  to  handle  interest  and 
discount  inventories  it  is  believed  the  student  will  see  how  to  handle  the  following  inventories : 

Inventory  of  unused  rent,  a  resource  inventory. 


PRODUCE  AND  PROVISION  BUSINESS 


107 


Inventory  of  unused  fire  insurance  premium,  a  resource  inventory. 
Inventory  of  unused  office  stationery,  a  resource  inventory. 

Inventory  of  material  used  and  money  paid  on  unfinished  contract,  less  any  money  received  on 
such  contract. 

Inventory  of  merchandise  or  manufactured  goods  unsold,  resource  inventory. 

Inventory  of  taxes  paid  in  advance,  a  resource  inventory. 

Inventory  of  unsold  shipment,  a  resource  inventory. 

Inventory  of  interest  accrued  on  overdrafts,  due  our  firm,  a  resource  inventory. 

Inventory  of  salaries,  due  our  firm,  a  resource  inventory. 

Inventory  of  due  bills  (names  of  persons  giving  them),  due  our  firm,  a  resource  inventory. 

509.  The  method  of  preparing  inventories  involving  such  items  is  shown  in  the  form  given 
on  page  60. 

510.  The  Interest  and  Discount  Inventory  is  the  difference  between  the  resource  interest  inven- 
tory and  the  liability  interest  inventory,  but  in  making  the  Balance  Sheet,  these  must  be  entered 
separately. 

BALANCE  SHEET 

511.  The  forms  of  Balance  Sheets  or  Financial  Exhibits  illustrated  on  this  and  following  page  are 
often  used  instead  of  the  form  shown  on  page  92.  The  form  shown  on  page  92  is  used  also  to  exhibit 
the  standing  of  a  business  as  shown  by  the  Ledger  of  a  business  without  closing  the  Ledger.  In  event 
the  showing  is  made  without  closing  the  Ledger  there  would  be  no  inventories  to  exhibit. 


Financial  Exhibitor  Balance  Sheet,  of  H.  B.  Burton's  Business,  July  31,  19- 


LF 

LEDGER  HEADINGS 

Trial    Balance 

Inventories 

Balance  of  Balances 

Debits 

Credits 

Resource 

Liability 

Debits 

Credits 

12 

H.  B.  Burton,  Stock 

5000 

13 

Mdse  Dis. 

52 

105 

53 

13 

Office  Furniture 

363 

05 

326 

74 

326 

74 

36 

31 

326 

74 

14 

Earl  Gray 

650 

650 

1 

14 

Western  Furniture  Co. 

363 

05 

363 

05 

363 

05 

15 

Samuel   Harris 

650 

650 

15 

Drayage 

2 

5 

5 

7 

5 

16 

J.  B.  Tracy 

650 

650 

17 

Expense 

100 

100 

18 

Freight 

32 

80 

32 

80 

19 

Main  Mills  Co. 

3500 

3500 

20 

Mdse 

3500 

2925 

12  50 

1250 

675 

1250 

21 

Herman  Peck 

650 

650 

650 

22 

H.  B.  Davis 

325 

325 

325 

CB 

Cash 

7055 

3686 

80 

3368 

20 

3368 

20 

17529 

85 

17529 

85 

1576 

74 

5 

5919 

94 

368 

05 

176 

11 

728 

5919 

94 

368 

05 

H.  B.  Burton's 

55i 

Sq 

H.  B.  Burton, 
Cr.  bv  Net  Invst 

5000 

5000 

H.  B.  Burton, 

Cr.  by  Surplus  Fund 

551 

89 

5000 

551 

89 

*H.B.Burton's  P.  W. 

5551 

89 

551 

89 

5551 

89 

5551   89 

1576 

74 

5 

5919 

94 

5919 

94 

728 

00 

728 

5919 

94 

5919 

94 

*Or  this  may  be  set  out  as  Balance  Invst,  $5,000  plus  Surplus,  $551.89,  in  two  items.    Proof  :  $5919.94— $368.05=$5551.89 


108 


PRODUCE  AND  PROVISION  BUSINESS 
Financial  Exhibit  of  H.  B.  Burton's  Business,  July  31,  19_ 


Resource 
Inventories 

Losses 

Resources 

Dr.  Side  of 
Ledger 

L.F. 

LEDGER  HEADINGS 

Cr.  Side  ol 
Ledger 

Liabilities 

Gains 

Liability 
Inventories 

12 

H.  B.  Burton,  Stock 

5000 

52 

13 

Mdse  Dis. 

105 

53 

326 

74 

36 

31 

326 

74 

363 

05 

13 

Office  Furniture 

650 

14 

Earl  Gray 

650 

14 

Western  Furniture  Co. 

363 

05 

303 

05 

650 

15 

Samuel  Harris 

650 

7 

2 

15 

Drayage 

5 

5 

650 

16 

J.  B.  Tracy 

650 

100 

100 

17 

Expense 

32 

80 

32 

80 

18 

Freight 

3500 

19 

Main  Mills  Co. 

3500 

1 2 jo 

1250 

3500 

20 

Mdse 

2925 

675 

650 

650 

21 

Herman  Peck 

325 

325 

22 

H.  B.  Davis 

3368 

20 

7055 

CB 

Cash 

3686 

80 

1576 

74 

176 

11 

5919 

94 

17529 

85 

17529 

85 

368 

05 

728 

5 

PROOF 

Total  Resouices 

5919 

94 

Total  Liabilities 

368 

05 

Proprietor's  P.  W. 

555i 

89 

Total  Gain 

728 

Total  Loss 

176 

11 

Proprietor's  Net  Gain 

551 

89 

Proprietor's  Invst 

5000 



Proprietor's  P.  W. 

555i 

89 

512.     The  following  form  shows  how  unexpired  rent  or  other  Expense  Inv.  would  be  treated 
in  the  Expense  account. 

EXPENSE 


19 
Aug. 

1 

C 

3 

1 

0 

0 

19 
Aug. 

31 

Rent  Invry 

4 

0 

41 

6 

J 

8 

3 

0 

n 

31 

Coal  Invry 

1 

8 

if 

31 

Loss  and  Gain  L 

7 

7 

2 

1 

3 

0 

1 

3 

0 

19 

Sept. 

1 

Invry's 

5 

8 

• 

GENERAL  REVIEW 


SPECIAL  REVIEW  QUESTIONS 


1.  What  is  a  partnership? 

2.  In  the  absence  of  an  agreement,  how  does  the  law 
apportion  the  losses  and  gains  among  the  partners? 

3.  How  may  an  agreement  erf  copartnership  be  an- 
nulled? 

4.  What  advantages  are  gained  by  the  use  of  a  Six- 
column  Journal? 

5.  What  is  meant  by  "  Chattels  "  ? 

6.  What  is  meant  by  "  Furniture  and  Fixtures  "  ? 

7.  State  two  methods  of  securing  a  loan  at  the  bank. 

8.  State  the  reason  for  having  notes  made  payable  at 
the  bank. 

9.  What  is  a  shipment? 

10.  Distinguish  between  the  terms  "Shipment"  and 
"Consignment." 

11.  Name  the  parties  to  a  shipment. 

12.  Describe  the  business  of  a  commission  merchant. 

13.  What  is  meant  by  "Commission"? 

14.  Define  net  proceeds. 

15.  Under  what  circumstances  will  a  shipment  account 
show  a  gain?    A  loss? 

16.  What  two  business  reasons  for  making  shipments? 

17.  What  charges  should  be  made  against  a  shipment 
account? 

18.  What  is  meant  by  a  shipping  order? 

19.  What  is  meant  by  a  shipping  receipt? 

20.  State  the  proper  procedure  in  making  a  shipment. 

21.  What  disposal  should  be  made  of  outstanding  ship- 
ments when  the  books  are  closed? 

22.  Why  should  freight,  drayage,  and  express  charges, 
etc.,  be  charged  to  Merchandise? 

23.  What  are  the  characteristics  of  a  good  business 
letter? 

24.  How  should  an  inclosure  be  inserted  in  a  letter? 

25.  What    is    meant    by   selling    goods   "subject    to 
draft"? 

26.  What  is  the  purpose  of  the  "Collection  account"? 

27.  What  is  meant  by  "  Discounting  Paper  "  ? 

28.  What  is  meant  by  "  Exchange  "  ? 

29.  What  is  a  bill  of  exchange? 

30.  What  is  meant  by  a  "Set  of  Exchange"? 

31.  What  is  the  difference  between  a  foreign  and  a  do- 
mestic bill  of  exchange? 

32.  What  is  meant  by  "  Fictitious  Payee  "? 

33.  What  is  meant  by  antedating  a  paper? 

34.  What  is  meant  by  postdating  a  paper? 

35.  What  party  to  a  paper  has  the  right,  to  antedate  or 
postdate  it? 


36.  Define  "Accommodation  Paper." 

37.  What  is  a  "Certificate  of  Deposit"  ? 


QUESTIONS  AND  ANSWERS 

1.  What  is  a  time  draft  ? 

A  Time  Draft  is  any  draft  that  is  not  payable  on 
presentation. 

2.  Name  two  general  forms  of  time  drafts  f 

Those  drawn  payable  after  sight  and  those  payabb 
after  date. 

3.  What  is  an  acceptance  f 

The  act  of  the  drawee  in  accepting  a  draft  by 
writing  the  word  "Accepted"  across  the  face,  witLj 
the  date,  and  signing  his  name.  The  word  ' '  Accept- 
ance "  also  applies  to  the  draft  after  it  has  been 
accepted. 

Jf.  When  should  a  draft  be  presented  for  ac- 
ceptance f 

As  soon  as  possible  after  it  has  been  received. 

5.  Why? 

In  order  to  make  the  drawee  responsible  for  its 
payment. 

6.  When  is  a  draft  payable  that  is  drawn  ten 
days  after  sight  f 

It  is  payable  ten  days  after  its  acceptance,  if  days 
of  gpace  are  not  allowed. 

7.  To  what  is  an  acceptance  equivalent  ? 

To  the  drawee's  promissory  note  for  the  amount 
of  a  draft. 

8.  Under  what  circumstances  is  it  necessary  to 
have  a  sight  draft  accepted? 

When  days  of  grace   are   allowed. 

9.  When  is  an  acceptance  negotiable  f 

When  the  draft  contains  the  words  "or  bearer," 
"or  order,"  or  negotiable  words  of  similar  import. 

10.  Why  should  commercial  papers  or  indorse- 
ments not  be  toritten  with  a  lead-pencil  ? 

Because  when  written  in  this  way  they  are  easily 
alterable. 

11.  Is  it  legally  necessary  that  an  acceptance  be 
made  in  red  ink  f 

It  is  not.  Red  ink  is  used  merely  to  make  the 
acceptance  more  conspicuous. 

12.  What  is  a  bank  draft  ?    See  page  66. 

IS.    What  is  the  purpose  of  bank  drafts  ? 

To  facilitate  payments  of  debts  without  the  actual 
transmission  of  money. 

[109] 


110 


GENERAL  REVIEW  QUESTIONS 


lit..  To  whom  is  the  maker  of  an  accommodation 
paper  responsible  ? 

To  the  person  who  has  received  it  from  the  payee 
in  good  faith  and  for  a  valid  consideration. 

15.  Is  there  any  essential  difference  between  bank 
drafts  and  bills  of  exchange  ? 

There  is  not ;  the  difference  is  in  form  only. 

16.  "Why  are  bills  of  exchange  sometimes  drawn 
in  sets  of  two  or  three  ? 

For  the  convenience  of  the  payee,  as  such  method 
of  issue  frequently  prevents  delay,  especially  in  the 
case  of  foreign  bills.  One  bill  may  be  sent  by  one 
steamer  and  another  by  the  next,  so  that  in  case  one 
is  lost  or  delayed  on  the  way,  the  other  may  reach 
its  destination,  the  payee  cashing  it,  thus  saving  the 
delay  of  having  another  bill  issued  which  would 
have  to  be  done,   had  but  a  single  bill  been  drawn. 

17.  Are  the  amounts  named  in  foreign  bills  ex- 
pressed in  foreign  money  or  in  the  money  of  the 
country  where  they  are  drawn  ? 

The  amounts  are  expressed  in  the  money  of  the 
country  in  which  the  bill  is  payable. 


EXERCISE  IN  JOURNALIZING 

Give  the  required  entries  for  the  following  trans- 
actions : 

1.  Borrowed  a  sum  of  money  at  the  bank  on  my 
note  receiving  the  face  of  the  same,  less  discount. 

Cash  and  Int.   and  Dis.  to  Bills  Payable. 

2.  Bought  5  Tons  of  Coal  for  use  in  the  store, 
giving  our  draft  on  Mason  &  Co. 

Expense  to  Mason  &  Co. 

8.  Sold  Miller  <fc  So?is  a  bill  of  mdse  receiving  in 
payment  our  note  with  accrued  interest,  and  the 
remainder  in   cash. 

Bills  Payable  and  Int.  and  Dis.  and  Cash  to  Mdse. 

4.  Bought  of  Martin  t&   Co.  an  invoice  of  mdse 
on  account,  paying  cash  for  the  freight  and  dray  age 
charges  on  the  same. 

Mdse   to  Martin  &  Co.  and  Cash. 

5.  Brown  &  Co.  owe  us  on  account  at  sixty  days  y 
they  prepay  the  account,  less  a  discount. 

Cash  and  Int.  and  Dis.  to  Brown  &  Co 


6.  The  bank  has  collected  our  draft  on  Davis  & 
Wilson  and  placed  the  proceeds  to  our  credit,  less 
their  charges  for  collection. 

Cash  and  Collections  to  Davis  &  Wilson. 

7.  Paid  our  note  with  interest  by  giving  our  sight 
draft  on  Jennings  <&  Taylor. 

Bills  Payable  and  Int.  and  Dis.  to  Jennings  & 
Taylor. 

8.  R.  W  Miller  presents  for  payment  our  accept- 
ance in  favor  of  Martin  &  Stone.  We  pay  the  same 
in  mdse   and  cash. 

Bills  Payable  to  Mdse    and  Cash. 

9.  We  owe  Thompson  <fe  Co.  on  account  at  ninety 
days.  We  arrange  to  prepay  this  account  receiving 
a  discount  of  five  per  cent,  for  such  prepayment. 

We  pay  the  account  with  our  draft  on  Harmon  <ib 
Stone  and  our  check  on  the   bank. 

Thompson  &  Co.  to  Int.  and  Dis.,  Harmon  & 
Stone,  and  Cash. 

10.  We  hold  J.  W.  Brown's  note  for  $500  with 
accrued  interest  $75.  We  discount  this  note,  receiv- 
ing $25,  less  than  the  entire  amount  due. 

Cash  $550  to  Bills  Receivable  $500,  Int.  and  Dis. 


11.  Gave  C.  H.  Stevens,  real-estate  agent,  our 
check  in  payment  for  rent  of  building  for  one  year 
and  insurance  on  mdse. 

Expense  to  Cash. 

12.  Gave  our  clerk,  to  S.  H.  Wilson  a  check  fcr 
$125,  amount  due  on  his  salary. 

Expense  to  Cash. 

13.  S.  H.  Wilson  returns  the  check  referred  to  in 
the  last  transaction  to  us,  ice  giving  him  for  the 
same  mdse  to  the  amount  of  $75  from  the  store  and 
currency  $50. 

Cash  to  Mdse   $75. 

llf..  Shipped  to  Martin  &  Co.,  commission  ?ner- 
chants,  a  consignment  of  mdse  ,  prepaying  freight 
and  drayage  on  the  same  in   cash. 

Shipment  No.  1  to  Mdse   and  Cash. 

15.  Received  a  ten-day  draft  and  a  Neio  York 
draft  as  proceeds  of  Shipment  No.  5. 

Bills  Receivable  and  Cash  to  Shipment  No.  5. 


PRODUCE  AND  PROVISION  BUSINESS 


111 


THE  PURCHASE  BOOK 

513.  The  Purchase  Book  is  used  for  recording  all  purchases,  except  for  cash,  the  same  as  the 
Sales  Book  is  used  for  sales.  The  first  entry  in  the  illustrated  form  is  for  merchandise  bought  on 
account,  the  second  entry  is  for  merchandise  bought  for  a  note.  All  amounts  brought  forward  should 
be   entered  in  the  second  column,  also  total  footings  of  each  page.     See  par.  344,  and  pages  42,  43. 

514.  When  you  buy  goods  of  people  whose  account  is  carried  in  the  Customers'  Ledger,  post 
direct  to  the  Customers'  Ledger  account,  writing  in  the  Explanation  column  the  number  of  the  invoice 
and  the  Purchase  Book  page  to  facilitate  ready  reference  for  auditing  the  books.  The  total  amount  is 
entered  in  the  Purchase  Book,  then  posted  to  the  debit  of  the  Merchandise  Account  in  the  General  Ledger, 
the  Ledger  Folio  being  entered  in  the  Folio  column  to  show  that  such  an  amount  is  posted.  The  foot- 
ings of  the  Purchase  Book  and  Sales  Journal  may  be  carried  forward  to  the  end  of  the  month,  but  in  your 
work  in  school  you  will  post  at  the  end  of  each  week,  or  if  your  teacher  so  instructs  you,  at  the  end  of 
every  day's  business. 


19 


July 


10 


Brought    forward 

W.  D.  Cooper,  Invoice  No.  468,  30  days,  2%  Cash   10  days 
Bills  Pay.,  Reg.  No.  42  for  Invoice  No.   473 


74   Mdse    Dr. 


290 

50 

180 

20 

360 

70 

540 

90 

1   831 

40 

CUSTOMERS*    LEDGER 

515.  The  Customers'  Ledger  is  sometimes  called  the  "Sales  Ledger"  or  "Retail  Sales  Ledger."  Its 
use  should  be  confined  strictly  to  the  accounts  with  those  persons  with  whom  we  sell  goods  on  account, 
but  it  is  sometimes  used  for  accounts  with  people  with  whom  we  buy  and  sell.  If  desirable,  the  General 
Ledger  may  be  dispensed  with  by  keeping  all  the  accounts  in  the  Customers'  Ledger,  although  this  is  not 
a  good  idea  as  it  is  better  to  use  a  General  Ledger  for  all  accounts  other  than  personal  accounts,  and  keep 
the  personal  accounts  in  the  Customers'  Ledger.  To  introduce  a  Customers'  Ledger  into  the  business,  all 
the  Personal  Accounts  in  the  General  Ledger  should  be  transferred  to  their  respective  pages  in  the  Cus- 
tomers' Ledger,  the  accounts  in  the  General  Ledger  being  balanced  and  ruled.  Sales  on  account  are 
itemized  in  the  Customers'  Ledger  for  convenience  in  making  out  itemized  statements,  as  it  would  not  at 
all  times  be  convenient  to  refer  to  the  Order  Book,  as  this  book  is  in  constant  use  by  the  entry  clerks  or 
salesmen. 

516.  When  taking  a  Trial  Balance,  the  accounts  in  the  Customer's  Ledger  are  to  be  taken  in  con- 
sideration with  those  of  the  General  Ledger. 

517.  The  ruling  of  the  Customers'  Ledger  is  identical  with  that  of  any  common  journal  or  sales 
book,  the  first  column  being  used  for  debits  and  the  second  column  for  credits  which  may  consist  of  cash 
payments  on  account,  cash  discounts  allowed,  or  anything  else  in  the  nature  of  a  credit. 

518.  Journal  Entries,  Purchase  Book  Entries,  or  entries  in  any  other  book  of  original  entry  are 
posted  direct. to  the  Customers'  Ledger,  if  they  affect  accounts  carried  in  the  Customers'  Ledger. 

519.  Charges  are  entered  direct  in  the  Customers'  Ledger  from  the  bill  at  the  time  of  making  the 
sale,  unless  a  duplicate  bill  and  charge  system  is  used.  In  case  of  the  latter  the  items  would  be  entered  in 
the  Customers'  Ledger  at  the  convenience  of  the  bookkeeper  from  the  duplicate  bill.  In  your  school 
work  you  will  itemize  all  sales  on  account  in  the  Customers'  Ledger  direct  from  the  bill,  using  your  Gen- 
eral Ledger  for  all  other  accounts.  You  should  also  make  all  records  in  the  Sales  Journal  as  shown  in  the 
accompanying  form,  the  object  of  which  is  to  have  a  record  of  all  sales  of  merchandise  on  account,  the 
total  being  posted  to  the  credit  of  the  Merchandise  Account  at  the  end  of  each  page. 

J.  5.  CUNNINGHAM 


19 
Aug. 


1000  bu.  Wheat 

Cr.  By  Cash,  C.  B.  24 

20  tons  Baled  Straw 

Cr.  by  20-10  5  %  on  above 

Cr.  by  30  day  note,  Reg.  139 


Dr. 

1  Cr. 

@  95 

950 

50 

4  00 

80 

25 

|  500 

28 


112 


PRODUCE  AND  PROVISION  BUSINESS 


520.  Sales  Journal.— A  Sales  Journal  is  generally  used  in  connection  with  a  Customers*  Ledger, 
principally  for  the  convenience  it  affords  in  keeping  the  books  in  balance.  This  book,  when  used,  takes 
the  place  of  the  Sales  Book,  and  in  use  differs  from  the  Sales  Book  only  in  that  the  sales  are  not  itemized. 
The  customer's  name  and  the  amount  of  the  sale  only  are  given. 

521.  If  desired,  the  entries  may  be  made  in  this  book  at  the  time  of  transferring  the  charge  from 
the  Order  Book  or  charge  tickets  to  the  Customers'  Ledger,  or  the  Sales  Journ.il  may  be  written  up 
previous  to  the  time  of  making  these  transfers,  the  folio  pages  of  the  Customers'  Ledger  being  entered  at. 
the  time  of  posting  from  the  Order  Book  or  charge  tickets. 

522.  The  credit  of  Merchandise  should  be  posted  from  the  Sales  Journal  to  the  Merchandise  account 
in  the  General  Ledger,  the  same  as  from  a  regular  Sales  Book. 

523.  For  school  purposes  you  are  to  use  your  Sales  Book  as  a  Sales  Journal,  making  the  entries 
direct  from  the  invoice  at  the  time  of  copying  it  in  the  Customers'  Ledger.  See  the  following  form  of 
Sales  Journal : 


SALES  JOURNAL 
Thursday,  Jan.  io,  19 


18 

E.  P.   Collins 

25  60 

29 

W.  E.   Dungan 

175 

45 

A.  H.  Gordon 

50 

80 

89 
74 

James  Whitmore 
Mdse   Cr. 

125  20 

376  60 

524.  Order  Book. — This  is  a  counter  book  made  of  manila  paper,  in  which  it  is  usual  to  write  with 
a  lead-pencil  a  memorandum  of  the  various  transactions  of  the  day  as  they  occur,  and  from  which  the 
records  for  the  general  books  are  made  by  the  bookkeeper.  It  is  advisable  to  use  not  less  than  two  Order 
Books,  as  this  plan  gives  the  entry  clerk  an  opportunity  to  transfer  the  charges  to  the  Customers'  Ledger 
and  Sales  Journal,  the  Order  Books  being  used  on  alternate  days.  It  will  not  be  necessary  to  use  this 
book  in  your  school  work,  as  all  charges  on  account  are  made  direct  from  the  invoices  to  the  Customers' 
Ledger  and  Sales  Journal. 

525.  Charge  Tickets. — These  tickets  are  so  generally  used  that  it  seems  unnecessary  to  give  a 
description  of  them.  After  an  order  his  been  taken  and  filled,  the  "charge  ticket"  is  ready  to  be  entered 
in  the  "Customers'  Ledger"  and  "Sales  Journal."  "Charge  tickets"  are  used  only  in  the  absence  of  an 
Order  Book. 

526.  Sales  Book. — An  ordinary  Sales  Book  cannot  be  used  to  advantage  in  connection  with  a 
Customers'  Ledger,  as  the  copying  of  the  charges  from  the  "Charge  Tickets,"  or  Order  Book  into  a 
Sales  Book  would  be  waste  of  time,  as  it  would  be  necessary  to  transfer  them  immediately  from  the  Sales 
Book  to  the  Customers'   Ledger. 

527.  Ledger  Form. — The  following  Ledger  form  may  be  called  a  "Journal  Ledger,"  or  an 
' '  Itemized  Ledger, ' '  and  is  very  convenient  for  a  retail  store.  All  charges  are  posted  or  copied  direct  to 
this  book  from  the  Counter  Order  Book  or  Blotter. 

528.  In  this  system,  the  bookkeeper  will  have  before  him  all  of  the  items  belonging  to  an  account, 
when  making  out  the  bills  or  statements  of  the  account.  Therefore,  this  work  can  be  done  in  half  the 
time  that  it  requires  when  it  is  necessary  to  refer  from  the  Ledger  to  some  other  book  for  the  items.  This 
form  is  given  merely  to  illustrate  the  plan.       Students  will  not  use  it  unless  so  instructed  by  the  teacher. 


JAMES  W.  MARKHAM 


19 

Sept. 

6 

Shoes.  3.50;  Ho3e  50;  Calico,  1.00;  Pins,  10 

5 

10 

19 

Sept. 

6 

10  Eggs,  20 

2 

00 

Hat,  2.50;  Sugar,  1.00;  Coffee,  1.00 

4 

50 

4  Butter,  25 

1 

00 

10 

Axle,  1.25;  Syrup,  1.00;  Bacon,  1.50 

3 

75 

1 

10 

12  Eggs,  20 

2 

40 

16 

Tea,  50;  Germea,  30;  R.  Oats,  50 

1 

30 

Cash, 

5 

00 

PRODUCE  AND  PROVISION  BUSINESS 


113 


CASH  BOOK  CONTAINING  THE  BANK  ACCOUNT 

529.  This  form  of  a  Cash  Book  is  convenient  and  practical  when  it  is  desired  to  keep  the  bank  and 
cash  accounts  in  one  book. 

530.  Little  or  no  explanation  is  necessary  for  the  bookkeeper  who  is  conversant  with  the  general 
principles  of  a  common  Cash  Book.  However,  it  may  be  well  to  state  that  all  sums  received,  including 
those  amounts  that  have  been  withdrawn  from  the  bank  to  use  in  the  business,  must  be  entered  in  the 
cash  column  on  the  debit  side.  See  item  of  $100.  The  bank  debit  column  on  the  debit  side  must  contain 
every  sum  deposited  or  otherwise  placed  to  our  credit  in  the  way  of  collections,  discount,  etc.  See  item 
of  $900.  The  bank  credit  column  on  the  credit  side  must  contain  the  amount  of  every  check  drawn,  or 
sum  paid  out  by  the  bank  for  our  notes,  drafts,  etc,  that  we  have  made  payable  at  the  bank.  The  cash 
credit  column  on  the  credit  side  must  contain  the  amounts  of  all  cash  paid  out,  including  such  discounts 
as  are  allowed  on  bills  receivable  and  other  commercial  papers.  See  the  second  item  of  $100,  which  is 
the  discount  allowed  on  the  note  of  $1,000,  which  is  entered  in  the  cash  debit  column  on  the  debit  side. 

531.  The  last  three  entries  on  the  credit  side  are  for  the  purpose  of  closing  the  Cash  Book,  and  are 
self-explanatory.     They  should  be  written  in  red  ink. 

532.  Observe  closely  how  the  balances  are  brought  down;  the  cash  balance  of  $6,364.98  includes 
the  currency  on  hand,  $3,534.98,  and  the  balance  on  deposit,  $2,830. 

533.  It  will  be  observed  that  the  footings  of  the  two  cash  columns  are  also  equal,  and  that  those 
of  the  bank  columns  are  equal.  You  are  not  to  use  the  Banking  Ledger  in  this  business.  The  bank 
account  in  the  Cash  Book  is  the  only  account  to  be  kept  with  the  bank. 


Thursday,  Nov.  i,  ig 


CASH    BOOK 


Thursday,  Nov.  /,  ig 


Date. 

LF. 

May 

22 

• 

28 
76 

V 
87 
41 
63 
101 

V 

•t 

23 

V 

43 

28 
76 

«c 

21 

87 
101 

19 

May 

21 

Balance  in  bank 

Mdse 

Geo.  Glenn,  on  acct 

Deposited 

H.  Stimpson,  on  acct 

Bills  Pay.  Reg.  No.  22,  at  Mer. 

Bank.dis.  100 

H.  S.  Gooding  on  acct 

H .  W.  Wood ,  on  acct 

Withdrawn  from  bank 

Deposited 

Bills  Rec.  Reg.  No.  96 

Mdse 

Geo.  Glenn,  on  acct 

H.  S  impson,  on  acct 

H.  W.Wood  on  acct 


Balance. 


Cash  Dr. 


4000 
1,192 

400 

780 

1,000 
350 

320 

100 

2,119 

920 

200 

95 

346 


11,861 


6,364 


75 


73 


Bank  Dr. 


4,000 


1,492 


900 


520 


6,912 


2,830 


75 


75 


May 


22 


LF. 


Expense,  rent, 

Mdse.  Inv.  No.  26,  Ck.  No.  91 

S.  W.   North,  on    acct.,  Ck. 

No.  92 

Dis.  note  No.  22 

Mdse.  Inv.  No.  46 

Bills  Pay.    Reg.  No.  21.    Ck. 

No.  93 
G.  Stoddard,    on    acct.,    Ck. 

No.  94 
Chattels,  1  horse  and  wagon, 

I.    O.    Chapman,    loan.    Ck. 

No.  95 

Bank  Cr.  Ck.  No.  96 

Store  and  Office  Fix 

Mdse.  Inv.  No.  76,  C'.c.  No.  97 

Bank  Cr 

Balance  in  Bank  2,830 

Currency  on  hand         3,534-98 
Balance  6,164  98 


Bank  Cr. 


779 
500 


765 
571 


600 
100 


767 


4,082 
2,830 


6.912 


») 


75 


Cash  Cr. 


100 


100 
900 


259 


55 


4.082 


6364 


11,861 


73 


534.  Memorandum  of  Credit. — When  errors  occur  through  shortage,  overcharge,  or  the  like,  the 
error  is  often  adjusted  by  the  seller's  sending  the  buyer  an  acknowledgment,  called  a  "Memorandum  of 
Credit."     See  next  page  for  illustration. 

535.  The  person  who  receives  a  Memorandum  of  Credit  should  debit  the  person  who  sends  it 
for  the  amount,  crediting  whatever  account  is  affected.  Thus,  if  J.  W.Jameson  &  Co.  remit  you  a 
Memorandum  of  Credit  of  $18.55  f°r  $2>\  gals-  Golden  Syrup,  56  cents,  it  indicates  that  you  have 
been  charged  with  the  syrup  without  having  received  it,  and  you  should  debit  J.  W.  Jameson  &  Co., 
and  credit  Merchandise. 


114  PRODUCE  AND  PROVISION  BUSINESS 

536.     The  following  is  a  common  form  of  a  Memorandum  of  Credit: 


t\mr\ORAHD\Jt\  of  Credit 


j»  j»  FROM  «5t  ^ 
J.  W.  JAMESON  &  CO., 


DEALERS     IN 


Produce  and  Provisions, 

1236  Market  Street, 
GRAND  RAPIDS,  MICH. 


Mr. 


vr*    *&*      X  \J   t&*    t£r* 

.&.  d'/iLe.mo.n, 


. 0g£    23,— \9 


33  1-8  Gals.  Golden  Syrup  56  ots. 


18 


55 


DISSOLUTION  OF  PARTNERSHIP 

537.  The  manner  in  which  a  partnership  may  be  dissolved  depends  upon  the  terms  of  the  agree- 
ment under  which  it  was  formed. 

538.  If,  as  in  the  present  business,  the  partnership  may  be  dissolved  at  the  will  of  either  partner,  a 
formal  notice  of  such  dissolution  should  be  given  by  the  partner  who  takes  the  initial  step  in  the  dissolu- 
tion, to  the  other  partner,  or  partners. 

539.  It  is  also  usual  to  send  a  notice  of  the  dissolution  to  the  business  houses  with  which  the  firm 
does  business,  also  to  publish  in  the  local  newspaper  a  general  public  notice  over  the  signatures  of  the 
partners  announcing  the  dissolution  of  the  partnership.  In  some  states  such  published  notice  is  required 
by  law,  in  order  to  relieve  the  parties  from  future  liabilities. 

540.  Direction. — You  may  now  proceed  to  dissolve  the  partnership  in  accordance  with  the  term 
of  your  agreement. 

541.  Notify  your  partner  in  writing  that  you  wish  to  dissolve  the  partnership.  The  following  is  a 
general  form  for  such  notice.  Prepare  a  notice  suitable  to  the  requirements  of  your  business  and  deliver 
it  to  your  partner. 

Henry  M.  Davis,  Cincinnati,  Ohio,  March  10,  19 

241  State  St. 

Dear  Sir. — In  accordance  with  the  terms  of  our  copartnership  agreement,  I  desire  to  give 
you  herewith  formal  notice  that  the  partnership  hitherto  existing  between  us  under  the  firm  name  of  Chas. 
H.  Moore  &  Co. ,  is  hereby  dissolved.  Respectfully  yours, 

Chas.  H.  Moore. 

542.  Direction. — Upon  the  delivery  of  the  notice  of  dissolution,  you  may  proceed  to  effect  a 
settlement  with  your  partner  upon  the  following  terms : 

543.  He  is  to  be  paid  from  the  funds  of  the  business  a  sum  equal  to  one  fourth  of  his  original  invest- 
ment, and  you  are  to  deliver  to  him  your  personal  note  for  an  amount  equal  to  one-half  of  such  invest- 
ment. The  remainder  is  to  stand  unsettled  until  such  time  as  the  books  are  closed  and  a  Balance  Sheet  of 
the  business  is  made  out. 


PRODUCE  AND  PROVISION  BUSINESS 


115 


544.  In  effecting  the  final  settlement,  an  allowance  of  ten  per  cent  for  bad  debts,  etc.,  is  to  be 
made  on  all  bills  receivable  and  personal  accounts  owed  to  the  firm. 

545.  After  delivering  to  your  partner  the  cash  and  note  as  above  provided  for,  and  taking  a  receipt 
for  the  same,  prepare  and  deliver  to  your  teacher  a  circular  letter  suitable  for  announcing  to  the  firms  with 
whom  you  are  doing  business,  the  dissolution  of  your  firm;  also  prepare  a  general  notice  for  publication. 
The  following  forms  will  serve  as  a  guide  in  the  preparation  of  such  circular  letter  and  notice.  Request 
your  partner  to  sign  both  the  letter  and  the  notice. 

54G.    CIRCULAR  LETTER   ANNOUNCING    DISSOLUTION   OF   PARTNERSHIP 

E.  M.  Tanner,  Cincinnati,  Ohio,  March  10,  19-. 

Omaha,  Neb. 
Dear  Sir: 

We  desire,  herewith,  to  apprise  you  that  the  partnership  heretofore  existing  between  Chas.  H.  Moore 
and  Henry  M.  Davis,  under  the  firm  name  of  Chas.  H.  Moore  &  Co.,  has  been  this  day  dissolved  by 
mutual  consent.  Mr.  Moore  will  continue  the  business  under  his  own  name,  and  will  assume  all  the  firm's 
liabilities,  also  the  collection  of  all  debts  owed  to  the  firm.  Very  respectfully  yours, 

Chas.  H.  Moore, 
Henry  M.  Davis. 

PUBLISHED   NOTICE   OF   DISSOLUTION 

Cincinnati,  Ohio,  March  10,  19- 

547.  Notice  of  Dissolution. — The  public  is  hereby  notified  that  the  partnership  hitherto 
existing  between  Chas.  H.  Moore  and  Henry  M.  Davis,  under  the  firm  name  of  Chas.  H.  Moore  &  Co., 
has  been  this  day  dissolved  by  mutual  consent. 

Chas.  H.  Moore  hereby  assumes  responsibility  for  the  payment  of  all  debts  owed  by  said  firm,  and 
all  debts  owed  to  the  firm  are  by  these  presents  declared  to  be  payable  to  him  only. 

Chas-.  H.  Moore, 
Henry  M.  Davis. 

548.  Direction. — If  the  required  circular  letter  and  notice  for  publication  have  been  approved  by 
your  teacher,  prepare  a  Balance  Sheet  in  accordance  with  the  requirements  of  the  accompanying  form, 
after  which  settle  with  your  partner  by  giving  him  a  check  for  the  balance  due  him,  then  return  to  the 
Business  Directions. 

549.  Balance  Sheet. — The  following  Balance  Sheet  exhibits  a  convenient  form  when  it  is  desired 
to  allow  a  discount  off  bills  receivable  and  the  personal  accounts  due  the  business  for  bad  debts  and 
collections.  The  allowances  made  for  this  purpose  are  treated  as  inventories,  and  are  entered  in  the 
Interest  and  Discount  account  in  red  ink,  with  the  following  explanation:  "10%  on  B.  Rec."  "10%  on 
Per.  accts. "  After  the  Interest  and  Discount  account  has  been  closed,  these  inventories  are  brought 
down  in  black  ink,  on  the  credit  side  of  the  account.  The  amounts  of  these  discounts  are  not  to  be 
entered  in  any  of  the  personal  accounts  or  in  the  Bills  Receivable  account. 

550.  Balances  of  Personal  Accounts. — When  there  are  many  personal  accounts,  it  will  be 
found  more  convenient,  and  will  also  effect  a  considerable  saving  of  labor,  to  list  the  personal  accounts 
separately,  recording  the  balance  of  each  account  instead  of  the  footings.     See  the  accompanying  form. 

551.  This  list  is  not  entered  on  the  Balance  Sheet,  but  the  totals  of  the  debits  and  credits  are 
entered  on  the  Trial  Balance,  and  the  sum  of  the  debit  balances  is  entered  among  the  resources,  and  the 
sum  of  the  credit  balances  is  entered  among  the  liabilities. 

552.  If  there  is  an  allowance  for  bad  debts,  etc.,  as  in  the  present  business,  the  amount  is  deducted 
from  the  debit  balances  as  shown  in  the  Balance  Sheet  on  page  116. 

NET  BALANCES  OF  PERSONAL  ACCOUNTS,  OCT.  3i,  i9 


E.  Higgins 

M.  Hendricks 

Fred  H  aines 

J.  D.  Day 

W.  McCann 

C.  B.  Lynch 

Net  amount  of  personal  accounts  Dr.  and  Cr 


299 

036 
020 


5«* 


30 

40 
73 

JJ 


737 
2G7 

323 


328 


18 
90 

_80 

88 


116 


PRODUCE  AND  PROVISION  BUSINESS 


BALANCE  SHEET  OF  CLARK,  MAY  &  CO.'S  BUSINESS,  OCT.  31,  19 


1 

2 

5 

6 

9 

83 

11 

12 

20 

22 

24 

26 

28 

30 

31 

32 

35 

37 

39 


C.  B 
83 
11 
12 
20 
22 
24 
28 
30 
31 
32 
39 


20 


12 
31 


11 

20 
28 
32 
35 
37 
39 


Net  Amount  of  Personal  Accounts  Dr.  and  Cr. 


Wm. 


Geo. 


Clark,  Stock 

"        Private 

A.  May,  Stock 

"      "      "      Private 

W.  S.  Wood,  Stock 

Cash,  per  C.  B 

Rent  (Inv'ry  $100) 

Mdse    (Inv'ry  $23,156.65) 

Expense  (Inv'ry  $450) 

Int.  and  Dis.  (Inv'ry  $18.50) 

Bills  Receivable 

Bills  Payable 

Furniture  and  Fixtures  (Inv'ry  $1,250). 

Gas  Deposit 

U.  P.  R.  R.  Stock  (Inv'ry  $1,300) 

Salary 

Chattels  (Inv'ry  $750) 

Exchange  

Advertising  (Inv'ry  $120) 


RESOURCES 

Personal  accounts  Dr.,  $10,556.43,  Dis.  at  10%,  $1,055.64. 

Cash,  per  C.  B 

Rent.     Inv'ry 

Mdse.     Inv'ry 

Expense.     Inv'ry 

Int.  and  Dis.     Inv'ry 

Bills  Receivable,  $9,080,  Dis.  at  10  %, 

Furniture  and  Fixtures.     Inv'ry 

Gas  Deposit 

U.  P.  R.  R.  Stock 

Chattels.     Inv'ry 

Advertising.     Inv'ry 


LIABILITIES 

Personal  Accounts  Cr 

Bills  Payable 

Firm's  present  worth,  night  of  Oct.  31,  19 


GAINS 


Mdse 

U.  P.  R.  R.  Stock. 


LOSSES 


Int.  and  Dis. 
Rent 


Expense 

Furniture  and  Fixtures 

Salary 

Chattels . .'. 

Exchange 

Advertising 

Firm's  net  gain,  night  of  Oct.  31,  19  . . 

WM.  CLARK,  PARTNER 

Cr.  by  net  stock  account 

Cr.  by  net  gain 

Dr.  for  net  private  account 

Net  present  worth,  night  of  Oct.  31,  19  . 

GEO.  A.  MAY,  PARTNER 

Cr.  by  net  stock  account 

Cr.  by  net  private  account 

Cr.  by  net  gain 

Net  present  worth,  night  of  Oct.  31,  19  . . 


w. 


S.  WOOD,  PARTNER 

Cr.  by  net  stock  account 

Cr.  by  net  gain 

Net  present  worth,  night  of  Oct.  31,  19 

Firm' 8  present  worth,  night  of  Oct.  31,  19 


1(1 


198 
2 

128 
2 

17 

13 

1 

1 

4 


385 


!) 
6 

23 


23 


15 


556 


273 

796 

496 
000 
738 
300 
327 
580 
060 
800 
30 
200 
690 
960 
123 
865 


799 


500 
109 
100 
156 
450 

18 
172 
250 

30 
300 
750 
120 


328 
500 


211 
172 


878 
900 
850 
550 
690 
210 
123 
620 


125 
889 
273 


000 
126 
779 


590 


43 


95 


43 


83 


81 


89 


15 

7 
192 

128 


20 


385 


328 

125 

000 
923 
590 
386 

793 

393 
500 
560 

72 


124 
799 


88 
60 


38 
66 

84 

61 

60 
50 


36 
43 


50 


9 
41 


23 


957 


828 
128 


383 


27 


39 


83 


11 

11 


824 
559 


26 

57 


20 


10 

41 


741 


906 


480 
128 


54 


30 


55 
39 


GENERAL  REVIEW 


SPECIAL  REVIEW  QUESTIONS 

1.  What  is  the  purpose  of  the  Purchase  Book? 

2.  How  does  the  Customers'  Ledger  differ  from  the 
ordinary  Ledger? 

3.  What  is  the  object  in  keeping  a  Customers'  Led- 
ger? 

4.  What  is  the  order-book,  and  for  what  is  it  used? 

5.  What  is  meant  by  Charge  Tickets? 

6.  Would  a  Sales  Book  be  used  in  connection  with  a 
Customers'  Ledger?    Why? 

7.  How  does  a  Sales  Journal  differ  from  a  Sales  Book? 

8.  How  may  a  bank  account  be  kept  in   the  Cash 
Book? 

9.  What  is  a  Memorandum  of  Credit? 

10.  Under  what  circumstances  is  it  used? 

11.  When  a  Memorandum  of  Credit  is  received,  what 
entry  should  be  made? 

12.  Upon  the  dissolution  of  a  partnership,  what  notices 
should  be  prepared? 


QUESTIONS  AND  ANSWERS 

1.  If  you  are  using  the  Cash  Book,  Journal, 
and  Customers''  Ledger,  and  bug  merchandise  for 
cash,  in  which  of  these  books  would  you  make  the 
entrg  f 

In  the  Cash  Book  on  the  credit  side. 

2.  If  you  buy  merchandise  on  account  ? 
In  the  Journal. 

S.  If  you  sell  merchandise  for  cash  f 
In  the  Cash  Book,  debit  side. 
4-    When  merchandise  is  sold  on  account  ? 
In  the  Customers'  Ledger. 

5.  If  you  make  a  shipment  and  prepay  the 
freight  ? 

In  the  Journal  and  Cash  Book. 

6.  In' what  books  are  the  entries  made  when  we 
buy  merchandise  of  John  Smith,  paying  a  portion 
of  the  amount  in  cash,  and  crediting  the  balance  to 
his  account  ? 

In  the  Journal  and  Cash  Book. 

7.  What  entry  should  be  made  in  the  Journal  ? 

Merchandise  to  John  Smith  for  the  full  amount  of 
the  bill. 

8.  What  entry  should  be  made  in  the  Cash 
Book  f 

Credit  John  Smith  for  the  amount  received. 

9.  What  other  entry  is  sometimes  made  for 
transactions  like  the  above  ? 

The  journal  entry  of  Merchandise  to  John  Smith 
for  the  portion  of  the  bill  remaining  unpaid,  and  a 
credit  entry  in  the  Cash  Book  for  the  amount  oaid 
on  the  bill. 

10.  Which  of  the  above  entries  is  preferable  f 


The  first  one,  in  which  John  Smith  is  credited  in 
the  Journal  for  the  amount  of  the  bill. 

11.  If  you  sell  merchandise  to  John  Smith,  re- 
ceiving part  payment  in  cash  and  the  balance  on 
account,  in  what  books  should  the  entry  be  made  f 

In  the  Customers'  Ledger  and  Cash  Book. 

12.  What  entry  should  be  made  in  the  Customers* 
Ledger  f 

Smith  should  be  charged  for  the  full  amount  of 
the  sale  on  account. 

13.  In  the  Cash  Book  ? 

Smith  should  be  credited  for  the  amount  of  the 
payment. 

14-  If  John  Smith  pays  cash  for  his  note  $100 
and  interest  $10,  in  what  book  would  the  entry  be 
made  f 

On  the  debit  side  of  the  Cash  Book,  Bills  Receiv- 
able, and  Interest  and  Discount,  each  being  credited 
with  the  respective  amounts. 

15.  What  advantage  is  gained  by  entering  notes, 
drafts,  etc.,  separately  in  the  opening  entry  f 

We  are  enabled  to  tell  what  commercial  papers  we 
were  holding  on  commencing  business. 

16.  What  is  the  advantage  in  making  payment 
by  means  of  checks  f 

It  is  a  safeguard  against  mistakes,  and  the  check, 
when  returned,  serves  as  a  receipt  for  payment. 

17.  What  is  the  difference  between  a  draft  at  three 
days   sight  and  a  draft  at  three  days  after  date? 

The  draft  at  three  days'  sight  is  hot  due  until 
three  days  after  acceptance  ;  the  draft  at  three  days 
after  date  is  due  three  days  after  it  was  issued,  un- 
less days  of  grace  are  allowed. 

18.  Under  what  circumstances  shoidd  we  make  an 
entry  for  interest  on  a  note  at  the  time  of  receiving 
the  note  f 

When  there  is  accrued  interest  on  the  note  at  the 
time  it  is  received. 

19.  What  is  meant  by  ' '  transferring  your  bank 
account "  when  a  partner  is  taken  into  the  business  ? 

It  means  that  the  balance  on  deposit  in  your  name 
is  to  be  transferred  to  the  credit  of  the  new  firm. 

20.  Bow  shoidd  this  be  done  f 

You  should  draw  a  check  for  this  balance  in  favor 
of  the  new  firm,  which  check  is  then  deposited  as  in 
the  case  of  any  other  check. 

21.  In  closing  the  books,  ichat  is  meant  by  allow- 
ing a  discount  on  the  personal  accounts  and  bills 
receivable  for  bad  debts  and  collection  f 

It  means  that  a  certain  percentage  has  been  al- 
lowed on  all  bills  receivable  and  personal  accounts 
due  the  firm,  for  the  purpose  of  reducing  these  to  a 
cash  basis. 


[117] 


DRY  GOODS  BUSINESS 

553.  Nine-column  Journal — ln  this  business  a  Nine-column  Journal  will  probably  provide 
columns  to  classify  the  Speculative  accounts  sufficiently  to  reduce  the  entries  and  the  postings  to 
a  minimum.  The  illustrative  entries  in  the  accompanying  form  will  show  how  a  Columnar  Journal 
may  be  used.  The  learner  can  use  his  Six-column  Journal  for  this  purpose  by  drawing  a  column  on 
both  sides,  and  an  extra  column  on  the  left  of  the  explanation  column.  The  number  of  columns  is 
purposely  left  open  that  the  teacher  may  increase  or  decrease  the  number  as  his  judgment  may  dic- 
tate.    See  par.  400,  433,  620. 

554.  It  is  not  at  all  necessary  to  have  the  same  number  of  columns  on  each  side  of  the  explana- 
tion column.  (In  fact,  the  explanation  column  of  a  Columnar  Journal  may  be  at  the  extreme  left 
or  the  extreme  right,  the  debit  and  the  credit  columns  of  related  accounts  appearing  side  by  side,  or 
all  the  debits  together  and  all  the  credits  together.  In  such  case  the  date  column  precedes  or 
follows  the  explanation  column.  However,  the  form  shown  is  the  usual  form.)  Columns  for  Int. 
and  Dis.  or  for  any  other  item  that  may  appear  frequently,  may  be  drawn  on  each  side.  The  num- 
ber and  the  position  of  the  columns  in  a  Columnar  Journal  as  to  debit  or  credit  are  matters  that  are 
to  be  determined  by  the  nature  of  the  business  and  the  judgment  of  the  bookkeeper.  The  object  is 
to  provide  Cash  columns  and  to  classify  the  items  of  the  Speculative  (Business)  accounts  that  enter 
into  the  business  so  as  to  have  the  fewest  possible  entries  and  the  fewest  possible  postings  and  the 
fullest  information  of  the  Business  accounts. 

In  providing  columns  for  a  Columnar  Journal,  the  learner  should  not  attempt  to  provide  a  col- 
umn for  an  account  that  appears  frequently  in  one  month  and  then  very  infrequently  or  not  at  all  in 
other  months;  but  an  important  point  that  he  should  bear  in  mind  is  that  stress  should  be  laid  on 
columns  for  the  Business  accounts  and  not  for  Financial  accounts  except  Cash.  He  should  remem- 
ber that  it  should  be  his  aim,  as  far  as  practical,  to  bring  out  the  Business  accounts  in  a  Columnar 
Journal,  because  business  men  get  their  "success-bearings"  daily  from  a  comparison  of  the  totals 
of  the  debits  and  the  credits  of  the  Business  accounts.  Students  should  be  able  to  tell  daily  what 
their  per  cent  of  gain  is,  and  the  relative  gain-producing  or  loss-producing  power  of  the  several  Busi- 
ness accounts.  If  for  any  special  reason,  a  column  may  be  provided  for  a'  Financial  account  other 
than  Cash.     See  classification  of  accounts  under  par.  242. 

555.  The  headings  of  the  columns  explain  the  use  of  the  columns. 

556.  Opening  Entry. — Write  your  opening  entry  on  journal  paper,  and  after  it  is  approved 
by  your  teacher,  copy  it  in  your  Columnar  Journal. 

557.  Note  that  the  Cash  Bal.  on  hand  is  set  in  the  Cash  column  on  the  debit  side  and  the  same 
amount  is  set  in  the  Sundries  column  on  the  credit  side,  and  the  "Bal.  on  hand"  item  checked  (^) 
in  the  folio  column  to  indicate  that  it  is  not  to  be  posted.  The  amount  is  set  in  the  credit  side  to 
make  the  col'umns  balance.  The  totals  of  the  debit  and  of  the  credit  columns  in  a  Columnar  Journal 
are  always  in  balance,  if  the  entries  are  correctly  made. 

558.  Entries  and  How  Made. — The  entries  are  made  in  all  Columnar  Journals  in  practically 
the  same  way.  The  name  of  the  account  to  be  debited  is  entered  in  the  left-hand  side  of  the  expla- 
nation column,  and  the  amount  is  set  in  the  column  under  its  corresponding  heading  on  the  left. 
The  name  of  the  account  to  be  credited  is  entered  in  the  right-hand  side  of  the  explanation  column 
and  the  amount  is  set  in  the  column  under  its  corresponding  heading  on  the  right. 

If  a  column  is  not  named  for  an  account  the  amount  is  entered  in  the  sundries  column. 

559.  Note  that  at  the  end  of  the  month  the  total  footings  of  the  several  columns  on  the  debit 
side  are  brought  into  the  Sundries  column  on  the  left,  and  the  total  footings  of  the  several  columns 
on  the  credit  side  are  brought  into  the  Sundries  column  on  the  right.  Then  the  totals  on  each  side 
are  added  and  double  ruled.  The  names  of  the  several  accounts  are  written  in  the  center  of  the  ex- 
planation column. 

560.  Posting. — Only  the  items  in  the  Sundries  column  need  be  posted  daily.  The  totals  of 
the  other  columns  are  posted  at  the  end  of  the  month.  The  totals  on  the  left  are  posted  to  the  debit 
of  their  respective  accounts,  and  the  totals  on  the  right  to  the  credit  of  their  respective  accounts. 
Cash  need  not  be  posted,  as  the  cash  columns  in  the  Columnar  Journal  take  the  place  of  the  Cash 
Book. 

561.  It  would  be  well  in  your  schoolwork  to  total  the  columns,  daily,  in  pencil,  to  see  that  the 
total  amount  of  the  debit  columns  equals  the  total  amount  of  the  credit  columns. 

For  further  discussion  of  columnar  work,  see  the  Sixteen-column  Journal. 
[118] 


DRY   GOODS   BUSINESS 


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120  DRY  GOODS  BUSINESS 

HANDLING  C.  O.  D.  ORDERS 

562.  Retail  or  Local  C.  O.  D.  Orders — (C.  O.  D.  means  Collect  on  Delivery.)  When  called 
on  to  handle  retail  or  local  C.  O.  D.  orders,  open  a  C.  O.  D.  account,  if  there  are  only  a  few  such 
orders,  and  debit  this  account  and  credit  merchandise  when  the  goods  go  out.  If  there  are  many  such 
orders,  then  a  set  of  C.  O.  D.  books,  consisting  of  a  C.  O.  D.  Sales  Book  and  a  C.  O.  D.  Register,  is 
used.  The  C.  O.  D.  Sales  Order  is  made  out  in  duplicate,  and  after  the  order  is  recorded  in  the  Reg- 
ister the  original  Sales  Order  is  sent  to  the  shipping  room  for  goods  to  be  wrapped.  Carbon  copy  is 
kept  in  C.  O.  D.  Sales  Book  as  permanent  record.  After  the  goods  are  wrapped,  the  order  is  attached 
to  the  package  and  given  to  the  driver  who  enters  the  order  in  his  Delivery  Receipt  Book.  When 
the  bill  is  paid  or  the  goods  returned  the  driver  reports  and  the  C.  O.  D.  Register  is  stamped  with 
the  date  when  paid  or  when  the  goods  are  returned. 

Some  houses  use  the  pad  of  C.  O.  D.  Delivery  Tickets.  Duplicates  are  made  out  and  both  the 
original  and  the  carbon  tickets  are  sent  to  the  shipping  clerk,  who  keeps  the  original  and  wraps  the 
carbon  with  the  package  to  be  handed  to  the  driver,  who  enters  the  order  in  his  Delivery  Receipt 
Book. 

563.  Wholesale  or  C.  O.  D.  Freight  Orders — If  required  to  ship  goods  C.  O.  D.  by  freight, 
make  out  duplicate  invoice  in  the  usual  way,  and  either  mail  the  original  to  the  customer  or  attach 
it  to  Bill  of  Lading.  Then  have  the  Bill  of  Lading,  showing  the  number  of  boxes  or  bales,  etc.,  made 
out  in  the  name  of  your  own  firm.  Then  draw  a  draft  on  the  customer  for  the  amount  of  the  invoice 
less  any  discount.  Then  write  on  the  Bill  of  Lading  the  following  or  similar  indorsement:  "Upon 
payment  of  the  attached  draft,  please  indorse  the  within  Bill  of  Lading  over  to of  your  city. 

JOHN  DOE  &  CO., 

Per " 


To  exemplify:  Suppose  the  firm  of  John  Doe  &  Co.  wishes  to  ship  C.  O.  D.  to  John  Smith.  John 
Smith,  having  been  apprised  of  the  amount  of  the  invoice  and  the  name  of  -the  bank  in  his  town  by 
letter,  goes  to  the  bank,  pays  the  invoice,  and  the  banker  delivers  the  indorsed  Bill  of  Lading  to  John 
Smith,  and  John  Smith  goes  to  the  freight  office,  pays  the  freight  charges  and  gets  his  goods. 

Some  firms  put  a  blank  indorsement  on  the  Bill  of  Lading;  others  indorse  the  Bill  of  Lading  to 
the  customer  and  send  it  to  the  banker,  while  still  others  request  the  bank  to  indorse  the  Bill  of  Lading 
to  the  customer  on  payment  of  the  invoice.  ■ 

564.  Shipping  Goods  C.  O.  D.  by  Express — If  required  to  ship  goods  C.  O.  D.  by  express, 
make  out  the  duplicate  invoice  in  the  usual  way,  except  if  the  transportation  charges  are  prepaid  these 
charges  will  have  to  be  added  to  the  invoice. 

Then  deliver  the  goods  to  the  express  company  and  ask  for  a  C.  O.  D.  envelope  wrapper.  Fill 
in  the  money  blank  on  the  C.  O.  D.  envelope  with  the  amount  of  the  invoice  plus  any  charges  for 
collecting  and  returning  the  money,  giving  the  total  to  be  collected.  Also  fill  in  the  return  blank 
with  your  firm's  name  and  address,  very  legibly,  so  as  to  insure  its  safe  and  speedy  return  to  your 
firm. 

The  express  company  will  transport  the  goods,  and  the  company's  agent  at  the  point  of  desti- 
nation will  make  the.  collection,  deliver  the  goods  to  the  customer,  and  return  the  amount  to  your 
firm  by  the  next  mail. 

It  is  well  to  remember  that,  if  the  package  is  worth  more  than  $50  it  is  better  to  mark  its  full 
v.vlue;  otherwise  in  case  of  loss  your  firm  could  collect  only  $50.  If  the  full  value  is  placed  on  the 
package  the  full  amount  can  be  collected  in  case  of  loss. 

There  is  an  additional  charge  for  assuming  the  greater  risk  in  transporting  the  more  valuable 
package,  but  it  is  prudent  to  pay  the  small  additional  charge  in  order  that  your  firm  may  be  able  to 
collect  the  full  value  in  case  of  loss. 

565.  Bank  Account  on  the  Check  Stub — Hereafter  the  Banking  Ledger  will  not  be  used,  the 
bank  account  being  kept  on  the  stubs  of  the  Check  Book.  This  method  of  keeping  the  bank  account 
is  followed  in  many  business  houses,  and  the  student  should  become  familiar  with  it. 

The  accompanying  form  of  checks  and  stubs  will  sufficiently  illustrate  the  method. 


RETAIL  HARDWARE  BUSINESS 


121 


No.  of  CheclcZ^_£_ 

Date        i/a^r?;  /^       19 

to_^z£; 


Fnr     V-ZL^^^  /Zt^  4/jV 


Bal.  brought  forward 

AlKt  Deposited 

Total  in  Bank 


Am' I  of  this  Checks 
Balance  in  Bant 


tf-/£<f- 


Afg 


*77^ 


7* 


No.  of  owl,  /yy 

Date 19 

To 


For_ 


5a/.  brought  forward 
Anil  n^ntfi^il 
Total  in  Bank 


Am'lof  this  Checks 
Balance  in  Bank 


4-f/rf-p& 


No.  £dA 


*—£* 


Pay  to_ 


~2^<rz^*^7^y7^cr^7j s  LJ^^^JyC^z^rrS/r^  icy 


THE  MERCHANTS  BANK 


_or  ^fceare*,  $AP(7 — - 


~^,yfls^?J>y 


(  >U  ssY-XC^^^^^y^y/-^ 


.Dollars 


Nn 

19 

THE  MERCHANTS  BANK 

Pay  TO          - 

nr  liMTPr    * 

Dolt-Ars 

In  College  Currency 

RETAIL  HARDWARE  BUSINESS 


In  this  business  the  books  are  to  be  kept  by  the  method  known  as  "Single  Entry  " 

566.  Single  Entry  Bookkeeping. — In  this  method  of  Bookkeeping  we  debit  all  persons  when  we 
sell  them  goods  on  account,  when  we  pay  them  on  account,  or  when  they  become  indebted  to  us  in  any 
manner,  but  we  do  not  make  any  corresponding  credit  entries.  In  like  manner,  we  credit  all  persons 
when  we  buy  of  them  on  account,  or  when  they  pay  us  on  account,  without  making  corresponding  debits. 

567.  If  we  are  able  to  determine  at  any  time  what  other  people  owe  us  on  account,  and  what  we 
owe  others  on  account,  we  have  accomplished  all  that  is  intended  by  single  entry. 

568.  Strict  single  entry,  however,  is  seldom  employed,  as  it  is  usually  desirable  to  keep  a  Cash 
Book,  or  an  account  with  Cash,  or  with  Expense,  and  sometimes,  with  Merchandise.  But  these  accounts 
are  kept  merely  as  memoranda,  and  as  a  matter  of  satisfaction  to  the  proprietor  of  the  business.  They 
have  no  essential  relation  to  the  business,  and  are  not  considered  in  making  up  a  balance  sheet  on  closing 
the  books. 

569.  Day  Book. — The  day  book  as  used  in  double  entry,  has  a  limited  use  in  business  at  present; 
compared  with  former  years.  When  it  is  used,  it  should  contain  a  comprehensive  statement  of  the  various 
business  transactions,  and  these  statements,  or  records,  should  be  made  at  the  time  that  the  transactions 
take  place. 

570.  The  Day  Book  preserves  a  record  of  the  transactions  until  such  a  time  as  it  may  be  convenient 
to  transfer  them  to  the  Journal.  When  the  Day  Book  is  used,  there  is  no  explanation  made  in  the  Journal 
following  the  journal  entries;  but  the  Journal  should  contain  the  page  of  the  Day  Book,  and  the  Day  Book, 
the  page  of  the  Journal,  although  a  check  ((/)  only  is  sometimes  used  in  the  Day  Book  to  denote  that  the 
transactions  have  been  transferred  to  the  Journal.  The  pages  are  also  transferred  in  a  like  manner  when 
items  are  transferred  from  the  Day  Book  to  the  Cash  Book. 

A  Single  Entry  Journal  entry  contains  the  name  of  the  account  to  be  debited  or  credited.     It 
to  be  debited  "Dr."  or  "To"  is  written  to  the  left  of  the  folio  column  or  left-hand  money  column, 
and  the  amount  is  set  in  the  right-hand  money  column.     If  to  be  credited  "Cr."  or  "By"  is  written 
to  the  left  of  the  folio  column  or  the  left-hand  money  column,  and  the  amount  is  set  in  the  right 
hand  money  column. 


122 


RETAIL  HARDWARE   BUSINESS 
SINGLE  ENTRY  DAY  BOOK 
Cincinnati,  O.,  Jan.    i,   19 


1/ 

• 

1/ 

V 

1/ 

2 

3 

4 

V 

5 

6 

10 

11 

1/ 

I,  H.  B.  Burton,  have  this  day  leased  the  store  at  No.  236  Madison  Street,  for 
the  purpose  of  conducting  a  General  Hardware  Business,  with  the  following 
resources  and  liabilities: 


Cash 

Bills  Rec.     W.  H.  Warner's  note  at  60 

days  due  today,  with  int.  after  maturity,  at  \%  a  month 
Mdse  per  Inv'ry 
Expense  per  Inv'ry 
Cunningham,   Curtis  &  Welch 
Bills  Payable.     Demand  Note,  fav.  Filer 

Thorne  &  Co.,  without  interest 
J.  S.  Gannon 
Osborn  &  Alexander 
H.  B.  Burton,  Stock 

Cunningham,  Curtis  &  Welch 
Stationery  for  office,  luv.  No.  1 


Dr. 
Dr. 

Dr. 


Cr. 

If 
«  ( 

Cr. 
Cr. 


Hall  Safe  &  Lock  Co. 
Safe  for  office  use 

Bought  of  Osborn  &  Alexander,  Mdse  per  Inv.  No.  2,  $380.75,  and  gave  my 
note  in  payment  at  3D  days,  without  interest 


G.  W.  Fuller 
640  Mission  St. 
3  doz.  table-knives,  ft  1846 

Crocker  Bros., 
340  Bush  St. 
\Yz  doz.  Daisy  Scythes, 
X      "     Sheep-Shears,  ft  1242 
%      "    Clipper  Scythes, 

G.  W.  Fuller 
640  Mission  St. 
10  lb  Glue 

yi  doz.  H.  D.  S.  P.  Shovels 
At  30  days,  less  10  %  for  cash 


Dr. 

5.50 
Dr. 

10.30,  less  ^ 
12.00  less  1/3 
8.60  net 

Dr. 

.18 
9.50 


Sold  to  J.  D.  Marshall 

1500  lb  Barbed  Wire  .03 

2  doz.  Silver  Spoons,  ft  873  7.50 

2  "     Knives  and  Forks  ft  262  2  50 

3  "    Teaspoons,  ft  9644  4.00 
Mr.  Marshall  indorsed  the  amount  of  this  sale  on  my  note  of  the  4th  inst.  in 

favor  of  Osborn  &  Alexander,  for  $380.75 


11 

2 
4 


45 

15 

5 

12 

77~ 


59 


25 


4900 
1500 

7800 

700 

70 

940 

1125 

840 

12064 

15 
300 


16 


30 
10 


50 

90 


17 


50 


84 


55 


The  Day  Book  used  in  single  entry,  like  the  double  entry  Journal,  is  used  as  a  book  of 
original  entry  and  agrees  with  it  inform.  The  first  column  is  used  for  itemizing,  and  all  amounts  to 
be  posted  are  recorded  in  the  second  column,  the  debits  and  credits  being  respectively  indicated  by 
the  abbieviations,  "Dr."  and  "Cr."  or  "To"  and  "By." 

571.  The  accompanying  Day  Book  form  illustrates  the  proper  manner  of  keeping  this  book. 

572.  Order  Book. — The  Order  Book,  Counter  Book,  or  Sales  Book,  as  it  is  variously  called , 
is  an  important  book  in  many  businesses  using,  single  entry.  This  is  a  small,  cheap  book,  with  flex- 
ible cover.  It  is  used  on  the  counter,  or  carried  by  salesmen,  to  take  orders  from  customers.  Sev- 
eral such  books  are  usually  kept  that  the  bookkeeper  may  post  from  one,  while  the  others  are  in 
use.  As  orders  are  put  up  for  delivery,  they  are  checked  off  in  the  margin  of  the  book.  In  event 
the  Order  Books  are  used  as  Sales  Book,  the  Day  Book  is  used  to  record  transactions  other  than 
Sales  ,  and  no  Journal  is  used.    Carbon  is  often  used  and  a  copy  given  to  the  customer. 

573.  Opening  the  Books- — The  opening  entry  is  made  in  the  Day  Book. 

If  there  are  resources  and  liabilities,  the  opening  entry  could  be  made  as  in  double  entry,  but 
such  items  as  are  not  to  be  posted  to  the  Ledger  must  be  "checked  off,"  by  means  of  a  check  mark  ( V  ) 

The  opening  entry  in  the  accompanying  form  illustrates  the  proper  method  of  opening  your  books 
where  there  are  resources  and  liabilities.  The  preliminary  announcement,  or  opening  statement,  of 
the  business  is  ommited,  but  the  student  is  expected  to  write  one  in  preparing  his  spring  entry. 

Observe  that  the  items  not  to  be  posted  to  the  Ledger  are  checked  off. 

574.  Direction — You  may  prepare  your  opening  entry  on  journal  paper  and  present  it  to  your 
teacher  for  inspection,  then  write  it  in  your  journal,  which  will  be  used  in  this  business  as  a  Day  Book. 


RETAIL  HARDWARE  BUSINESS 


123 


575.  Cash  Book. — While  in  single  entry  proper,  no  account  is  kept  of  the  receipts  and  expendi- 
tures of  cash,  most  business  men,  even  though  their  books  were  kept  by  single  entry,  would  probably 
prefer  to  keep  a  Cash  Account. 

576.  The  Cash  Book  may  be  kept  as  in  double  entry,  but  those  who  employ  single  entry  gen- 
erally use  but  one  page  of  the  Cash  Book  at  a  time,  recording  th3  cash  received  in  the  first  column 
and  the  cash  paid  out  in  the  second  column. 

577.  The  following  form  illustrates  the  usual  method  of  keeping  the  single  entry  Cash  Book. 
The  abbreviations  "Dr."  and  "Cr."  appearing  after  the  items  to  be  posted,  are  inserted  for  con- 
venience in  posting,  and  may  be  omitted  if  desired. 


SINGLE  ENTRY  CASH  BOOK 


DR. 


CR 


19 

Jan. 


Feb. 


1 

• 

G 

8 

l/ 

U 

10 

11 

20 

22 

2:-! 

24 
26 

l/ 

l/ 

27 

_— . 



1 

\/ 

Cash 

Paid  one  month's  rent 

Paid  Hall  Safe  &  Lock  Co.,  on  acct 

Received  Cash  of  G.  W.  Fuller  on  acct 

Cash  Sale  to  A.  B.  Coon 

Paid  J.  S.  Gannon  on  acct 

Received  of  Crocker  Bros,  on  acct 

Paid  Hall  Safe  &  Lock  Co.  on  acct 

Cash  Sales 

Paid  Cash  for  Mdse,  Inv.  No.  3 

Paid  Osborn  &  Alexander  on  acct 

Received  of  G.  VV.  Fuller  on  acct 

Withdrew  for  personal  use 

Paid  for  Typewriter 

Paid  Osborn  &  Alexander  balance  of  my  note,  less  $3  discount 

Paid  Osborn  &  Alexander  on  acct 

Balance 


4900 

5 

57 

10 
954 


19 

5946 


5946 


3456 


13 


38 


50 
75 


500 

50 

500 
500 

75 

75 
300 
364 

2489 
3456 


5946 


75 


75 

3L 
13 


578.  Single  Entry  Ledger. — In  form,  the  single  entry  Ledger  is  ruled  the  same  as  a  Day  Book 
or  Journal,  the  first  money  column  being  used  for  debits  and  the  second  money  column  for  the  cred- 
its. If  desired,  the  personal  account  maybe  itemized  as  in  the  "  Customer's  Ledger.  "  See  page  111. 
However,  the  form  of  Ledger  ordinarily  used  in  double  entry  is  frequently  used  in  single  entry. 

Unlike  the  double  entry  Ledger,  the  single  entry  Ledger  is  never  in  balance. 

In  the  Hardware  Business  you  are  to  use  the  same  Ledger  you  have  hitherto  used. 

579.  Other  Books  and  Accounts.— In  single  entry  as  in  double  entry,  any  auxiliary  book  may 
be  used  that  would  facilitate  the  work  of  the  bookkeeper,  or  give  any  required  exhibit  of  any  por- 
tion of  the  business.  Thus  a  Bill  Book  or  Sales  Book  might  be  kept  if  desired.  In  fact,  there  is  no 
definite  line  of  difference  between  single  and  double  entry;  the  one  may  merge  gradually  into  the 
other.  The  more  general  accounts  that  are  kept,  the  nearer  the  method  will  approach  to  full 
double  entry. 

CLOSING  SINGLE  ENTRY  BOOKS 

580.  The  first  step  in  closing  a  set  of  books  in  single  entry  is  to  prepare  a  statement  of  the 
face  of  the  Ledger.  This  is  made  out  on  journal  paper  and  in  the  same  manner  as  an  ordinary 
Trial  Balance.     But  it  will,  of.  course,  not  be  in  balance. 

581.  Balance  Sheet. — The  single  entry  Balance  Sheet  consists  of  a  statement  of  the  face  of 
the  Ledger,  together  with  an  itemized  list  of  all  resource-,  including  the  cash  on  hand  and  in  bank, 
inventories  of  all  property  on  hand,  a  list  of  the  personal  accounts  and  other  debts  owed  to  the  firm. 
This  is  followed  by  an  itemized  list  of  the  liabilities,  including  all  personal  accounts  or  other  debts 
owed  by  the  firm. 

582.  The  present  worth  of  the  business  is  found  by  deducting  the  total  sum  of  the  liabilities 
from  the  total  sum  of  the  resources,  and  this  result  compared  with  the  investment  gives  the  net  loss 
or  gain.  This  is,  in  fact,  the  only  method  of  ascertaining  the  net  loss  or  gain  by  single  entry,  as  not 
all  the  loss  and  gain  accounts  are  kept. 

You  may  now  prepare  a  Balance   Sheet  in  accordance  with  the  form  on   the  next  page. 


124 


RETAIL  HARDWARE  BUSINESS 


583-     If  there  should  be  a  gain,  an    entry  should    be  made  in  the  Day  Book,  crediting  the 
proprietor  with  the  net  gain  as  follows: 

H.  B.  Burton Cr.  $1,921.77 

For  Net  Gain  on  closing  Feb.  1,  19 


SINGLE  ENTRY  BALANCE  SHEET 

Of  H.  B.  Burton's  Business,  March  1,  19 


FACE  OF  LEDGER 

H.  B.  Burton,  Stock 

13040 

47 

Hall  Safe  &  Lock  Co. 

200 

300 

J.  S.  Gannon 

701 

75 

1125 

50 

G.  W.  Fuller 

48 

50 

42 

Expense 

B.  B.  Kerrigan 

Cash  - 

RESOURCES 

1074 

113 

5290 

09 
25 

65 
260 
377 

90 
50 

7427 

59 

15211 

37 

G.  W.  Fuller 

6 

50 

Cash 

4912 

50 

Mdse  Inv'ry 
Expense  " 

8746 

25 

925 

14590 

25 

LIABILITIES 

Hall  Safe  &  Lock  Co. 

100 

G.  S.  Gannon 

423 

75 

B.  B.  Kerrigan 

147 

65 

Bills  Payable 

H.  B.  Burton' s  Present  IVorth 

990 

1661 

40 

= 

H.   B.  BURTON,    PROPRIETOR 

I2Q28 

~*r 

Net  Investment,  Feb.  1,  19 

13040 

47 

Present  Worth,  March  1,  " 

12928 

85 

Dr.  for  net  loss 

111 

62 

. 



^— 

CLOSING  ENTRIES 

Mdse  per  Inv'ry                                                                                                        Dr. 

8746 

25 

Expense  "      "                                                                                                            " 

925 

H.  B.  Burton,  Stock, 

111 

02 

Bills  payable                                                                                                          Cr. 

990 

Entry  necessary  to  change  the  books  to  double  entry  on  this  date,  March  1,  19 

TRIAL  BALANCE 

•                               March  i,  19 

H.  B.  Burton,  Stock 

12928 

85 

Hall  Safe  &  Lock  Co. 

200 

300 

J.  S.  Gannon 

701 

75 

1125 

50 

G.  W.  Fuller 

48 

50 

42 

Expense 

925 

B.  B.  Kerrigan 

113 

25 

260 

90 

Mdse 

8746 

25 

Bills  Payable 

990 

Cash 

4912 

50 

= 

— 

15647 

Zb 

15647 

25 

Proof  of  Single  Entry  Posting. — The  sum  of  the  debits  and  the  credits  in  the  Day  Book  must 
equal  the  sum  of  the  debits  and  the  credits  in  the  Ledger.  If  there  are  old  balances  in  the  Ledger,  add 
the  old  balances  to  the  footing  of  the  debits  and  the  credits  of  the  Day  Book. 

Proofsheet. —  Rule  a  sheet  of  paper  like  a  Four-column  Journal.  Set  the  debit  balances  of  Ledger 
accounts  in  the  outside  left-hand  column  and  the  total  debit  of  each  Ledger  account  in  the  next  column, 
writing  the  names  of  the  Ledger  accounts  in  the  explanation  column.  Set  the  total  credit  of  each  Ledger 
account  in  the  first  right-hand  column  and  the  credit  balance  of  each  Ledger  account  in  the  outside  right- 
hand  column.  Foot,  and  compare  items  of  balances  with  Ledger  accounts  showing  balances,  and  total 
footing  of  debit  and  credit  Ledger  accounts  with  total  footing  of  debits  and  credits  of  the  Day  Book  (or 
books  of  original  entry),  plus  old  balances  when  there  are  old  balanees  on  the  Ledger. 

If  the  accounts  that  are  in  balance  are  omitted  from  the  Proofsheet,  the  total  of  the  several  amounts 
that  balanced  the  accounts  will  have  to  be  deducted  from  the  footing  of  books  of  original  entry.  To  keep 
track  of  the  amounts,  open  a  Balanced  Account,  and  when  an  account  is  balanced,  rule  it  up,  and  carry 
the  amount.that  was  necessary  to  balance  it  to  the  Balanced  Acconnt. 


RETAIL  HARDWARE  BUSINESS  125 

584.  If  there  should  be  a  net  loss,  debit  the  proprietor  for  it,  by  making  a  day  book  entry,  in  the 
following  form: 

H.  B.  Burton Dr.  $380 

For  net  Loss  on  closing 
the  books  Feb.  1,  19 

585.  The  closing  entry  should  be  posted  to  the  proprietor's  account  in  the  Ledger. 

586.  The  Cash  Book  should  be  closed. 

587.  Close  the  Merchandise  account,  as  in  double  entry,  and  bring  down  the  inventory  only  when 
it  is  desired  to  continue  the  use  of  the  account.  The  loss  or  gain  shown  by  this  account  is  not  to  be  trans- 
ferred to  Loss  and  Gain,  or  to  any  other  account;  neither  can  it  be  used  in  any  other  way  in  ascertaining  the 
net  loss  or  gain  of  the  business.  The  Merchandise  account  might  also  be  closed  by  a  day  book  entry  as 
follows: 

Merchandise Dr.    $1,650 

Entry  necessary  to  close  this  account 
Dec.  31,  19 

588.  Close  expense  and  all  other  loss  and  gam  accounts,  if  you  have  such,  according  to  the  method 
employed  in  closing  the  Merchandise  account.  The  closing  of  these  accounts  is  a  matter  of  convenience 
rather  than  of  necessity,  as  they  are  not  taken  into  consideration  when  the  books  are  closed.  If  the  books 
are  to  be  changed  to  double  entry,  the  closing  of  these  accounts  would  of  course  be  imperative. 

589.  Changing  a  Set  of  Books  from  Single  to  Double  Entry. — The  books  should  be  closed  at 
the  time  of  making  this  change.  Make  a  journal  entry  in  the  Day  Book,  debiting  or  crediting  the  pro- 
prietor with  the  net  loss  or  gain ;  also  enter  in  it  all  resources  and  liabilities  appearing  in  the  Balance  Sheet 
which  are  not  already  in  the  Ledger;  such  as  Merchandise  inventory,  Cash,  Bills  Receivable,  Bills  Payable. 
Shipments,  etc.,  according  to  the  following  day  book  entry,  which  is  never  in  balance: 

Cash,  per  C.   B.  97 $1,382 

Mdse    Inventory 9,460 

Bills  Receivable,  notes  40,  41,  and  42 794 

Furniture  and  Fixtures,  Inventory 590 

Bills  Payable,  notes  63  and  64 $     584 

Proprietor's  Stock,  for  net  gain 1,340 

Entries  necessary  for  changing  the  books  from  single  to 

double  entry  on  this  date,  Feb.  28,  19  ' 

590.  A  Trial  Balance  should  be  taken  immediately  after  posting  the  journal  entry  for  changing  the 
books,  to  test  the  corrections  of  the  work. 

591.  Changing  a  Set  of  Books  from  Double  to  Single  Entry. — This  change  may  be  effected  by 
simply  ruling  up  and  discontinuing  the  use  of  all  accounts  that  are  not  to  be  kept;  but  a  more  systematic 
and  businesslike  method  of  making  this  change  is  the  following:  Post,  take  a  Trial  Balance,  make  out  a 
Balance  Sheet,  and  close  the  books  as  heretofore  in  double  entry,  except  that  no  inventory  is  to  be  brought 
down,  unless  it  be  decided  to  keep  the  account  Lo  which  it  belongs.  By  closing  according  to  this 
method,  all  the  loss  and  gain  accounts,  Bills  Payable,  Bills  Receivable,  etc. ,  are  eliminated,  leaving  nothing 
but  the  personal  accounts  and  such  other  accounts  as  you  desire  to  keep.  This  completes  the  change, 
leaving  the  books  as  though  they  had  been  previously  kept  by  single  entry. 

Liquidation. — (a)  Any  solvent  business  may  be  liquidated  in  the  following  manner:  (i)  Col- 
lect all  accounts  receivable  and  Bills  Receivable.     (2)     Pay  all  accounts  payable  and   Bills   Payable. 

(3)  If  a  single  proprietor,   draw  a  check  in  his  favor  for  the  balance  as  shown  by  the  Cash  Book. 

(4)  If  a  partnership  or  corporation,  draw  checks  for  such  parts  of  the  balance  as  shown  by  the  Cash 
Book,  as  their  several  interests  require.  (5)  Post.  The  two  sides  of  the  Cash  Book  will  be  in  balance, 
and  all  Ledger  accounts  will  be  in  balance,  if  no  mistake  has  been  made.  In  your  schoolwork,  any 
suspense  or  suspended  account,  will  be  closed  into  Loss  and  Gain. 

In  merging  an  old  business  with  a  new  business,  if  desired  to  liquidate  the  accounts  of  the  old 
business  as  they  become  due  (or  may  be  collected),  it  is  convenient  to  liquidate  them  through  a 
Liquidation  account. 

(b)  If  the  business  is  insolvent,  you  would  better  ask  your  teacher  for  procedure.  He  may 
require  you  to  send  10  cents  to  the  Superintendent  of  Documents,  c/o  the  Government  Printing 
Office,  at  Washington,  D.  C,  for  a  copy  of  the  United  States  Bankruptcy  Law. 


126 


GENERAL  REVIEW 


The  following  Trial  Balances  are  taken  by  totals.  They  are  generally  taken  by  differences.  The  student  is  to 
follow  the  teacher's  preference.  The  Continued  Trial  Balance  Book  is  made  with  one  short  leaf  in  order  that  the 
names  need  be  written  but  once  for  the  twelve  months. 

CONTINUED  TRIAL  BALANCE,  i9 


LEDGER  ACCOUNTS 

JANUARY 

FEBRUARY 

MARCH 

APRIL 

L  F 

Dr. 

Cr. 

Dr. 

Cr. 

Dr. 

Cr. 

Dr. 

Cr. 

1 

H.  B.  Burton,  Stock 

5000 

7033 

10 

273 

95 

8125 

60 

430 

45 

9780 

15 

2 

Cash 

9670 

50 

6380 

40 

4779 

10 

1681 

30 

8100 

90 

5288 

80 

9840 

33 

6344 

81 

3 

Expense 

100 

375 

480 

50 

480 

50 

4 

Mdse 

6460 

7560 

40 

6275 

50 

8200 

50 

8266 

20 

9180 

90 

8642 

38 

9979 

44 

5 

B.  F.  Stone 

1150 

40 

1520 

50 

1125 

60 

2161 

80 

2890 

90 

1944 

82 

358 

65 

6 

H.  Murphy 

264 

945 

50 

945 

50 

560 

50 

1580 

25 

2185 

35 

1974 

34 

42 

49 

7 

F.  B.  Clark 

2062 

30 

235 

80 

1125 

75 

1325 

75 

2960 

60 

1888 

50- 

2004 

14 

181 

40 

8 

J.  F.  Wyman 

1520 

90 

2469 

65 

295 

80 

395 

80 

2224 

70 

1985 

78 

2874 

80 

2292 

40 

9 

D.  M.  Ellis 

1379 

75 

1749 

50 

2500 

2800 

2934 

80 

3272 

40 

5152 

76 

3023 

50 

10 

W.  D.  Campbell 

1966 

80 

233 

40 

2100 

580 

1517 

90 

2234 

80 

1648 

35 

2342 

80 

11 

W.  D.  Grimes 

3785 

40 

4067 

40 

6844 

29 

12 

James  Turney 

27S0 

32 

4334 

60 

2780 

32 

12 

Bills  Receivable 

6548 

34SS 

4560 

13 

Suspense 

100 

14 

R.  A.  Grant 

1029 

5V 

24574 

65 

24574 

65 

23702 

55 

23702 

55 

43897 

32 

43897 

32 

42815 

47 

42815 

47 

GENERAL  REVIEW 


SPECIAL  REVIEW  QUESTIONS 

1.  What  accounts  are  kept  in  strict  single  entry  book- 
keeping? 

2.  What  other  accounts  are  frequently  kept? 

3.  In  opening  the  books  by  single  entry,  what  items 
are  checked  off  in  the  opening  entry? 

4.  What  is  the  purpose  of  the  Day  Book? 

5.  How  does  the  single  entry  Cash  Book  differ  from 
the  double  entry  Cash  Book? 

6.  In  what  respects  does  the  single  entry  Ledger  differ 
from  the  double  entry  Ledger? 

7.  In  closing  a  set  of  single  entry  books,  how  is  the 
present  worth  found? 

8.  How  is  the  loss  or  gain  found? 

9.  What  should  be  done  in  order  to  change  a  set  of 
books  from  single  to  double  entry? 

10.  How  may  a  set  of  books  be  changed  from  double 
to  single  entry? 


QUESTIONS  AND  ANSWERS 

1.  What  is  the  general  difference  between  single 
and  double  entry  bookkeeping  f 

In  single  entry,  personal  accounts  alone  are  kept, 
and  there  is,  therefore,  no  record  of  the  losses  or 
gains  or  of  the  transactions  affecting  property  alone. 

2.  If  accounts  are  kept  with  Merchandise,  Ex- 
pense, or  other  loss  or  gain  accounts  in  single  en- 
try, are  they  taken  into  consideration  when  the  books 
are  closed  ? 

They  are  not. 

3.  What  is  the  object  in  keeping  such  accounts? 
They  are  kept  simply  as  a  matter  of  satisfaction 

to  the  proprietor  ;  they  are  merely  memorandum  ac- 
counts. 

Jf.  How  are  such  accounts  disposed  of  when  the 
books  are  closed? 

They  are  simply  ruled  up,  their  balances  not  be- 
ing considered  in  any  way. 


GENERAL  REVIEW 


127 


5.  Why  is  single  entry  so  called  ? 

Because  but  one  amount  is  recorded  in  each  entry. 

6.  What  is  the  general  object  sought  in  single  en- 
try bookkeeping  ? 

To  keep  a  record  of  the  amounts  owed  to  the  busi- 
ness on  personal  account:;,  also  a  record  of  the 
amounts  owed  by  the  business  to  other  persons. 

7.  What  entries  should  be  made  in  the  Day 
Book? 

Those  that  are  intended  to  be  posted  to  the 
Ledger.  Also  such  memoranda  of  transactions  as 
may  be  desirable. 

8.  Shoidd  the  opening  entry  in  single  entry  differ 
materially  from  that  of  double  entry  ? 

It  should  not,  as  both  should  show  all  the  re- 
sources and  liabilities  of  the  business. 

9.  What  is  meant  by  a  "  statement  showing  the 
face  of  the  Ledger  "  ? 

A  statement  showing  the  debit  and  credit  footings 
of  each  ledger  account. 

10.  Should  a  bank  account  be  kept  in  single 
entry  ? 

It  should,  as  it  is  necessary  in  any  business  to  be 
able  at  any  time  to  find  the  bank  balance. 

11.  Is  a  Cash  Book  usually  kept  in  single  entry  ? 
It  is. 

12.  What  entries  are  made  in  this  book  ? 
All  cash  received  and  all  cash  paid  out. 

13.  What  entries  are  posted  from  the  single  en- 
try Cash  Book  to  the  Ledger  ? 

Those  that  affect  personal  accounts  and  such  other 
accounts  as  we  may  be  keeping. 

llf.  Can  the  Banking  Ledger,  Sales  Book,  In- 
voice Book,  etc.,  be  used  to  advantage  in  single 
entry  ? 

They  may  under  some  circumstances  ;  it  will  de- 
pend upon  the  nature  of  the  business. 

15.  Is  the  single  entry  Ledger  ever  in  balance  ? 
It  is  not. 

16.  What  information  are  we  able  to  get  from,  a 
Ledger  in  single  entry  bookkeeping  ? 

That  pertaining  to  personal  accounts  only  unless 
other  accounts  are  kept 

17.  What  are  the  only  books  necessary  in  single 
entry  ? 

A  Day  Book  or  Blotter  and  Ledger. 

18.  What  necessary  preparation  should  be  made 
in  closing  single  entry  books  ? 

Make  out  a  statement  showing  the  face  of  the 
Ledger,  the  same  as  a  trial  balance  in  double  entry. 

19.  What  use  would  then  be  made  of  this  state- 
ment ? 

From  it  we  select  all  personal  accounts  that  show 
a  resource  and  all  that  show  a  liability,  to  which  we 
add  all  inventories  and  outside  resources  and  liabili- 
ties that  belong  to  the  business. 

20.  If  the  business  shows  a  net  gain,  where 
should  the  gain  be  entered? 

Simply  credit  the  proprietor  for  it  by  a  day  book 
entry. 

21.  If  the  business  shows  a  loss,  what  entry 
shoidd  be  made  ? 

Debit  the  proprietor  in  the  same  manner  as  you 
would  credit  him  in  case  of  a  gain. 


22.  What  real  object  is  there  in  closing  the  loss 
and  gain  accounts  in  single  entry  ? 

There  is  no  object  except  that  of  dispensing  with 
them. 

23.  When  merchandise  is  sold  for  cash,  in  what 
book  should  the  entry  be  made  ? 

In  the  Cash  Book  only. 

2 If..  In  case  we  are  keeping  a  Merchandise  ac- 
count, tohat  special  arrangement  may  be  made  for 
cash  sales  ? 

A  merchandise  column  might  be  kept  in  the  Cash 
Book. 

25.  In  the  absence  of  a  merchandise  column,  what 
shoidd  be  done  ? 

It  would  be  necessary  to  post  the  merchandise 
items  separately. 

26.  Suppose  we  have  loss  and  gain  or  other  ac- 
counts in  our  opening  entry  that  we  do  not  wish  to 
keep  in  the  Ledger,  such  as  Mercliandise,  Chattels, 
Bills  Receivable,  Interest  and  Discount,  etc.,  how 
should  they  be  treated? 

They  should  be  checked  off  in  the  opening  entry, 
thus  showing  that  they  are  not  to  be  posted. 

27.  Why  are  the  terms  "  Dr."  and  "  Or"  used 
in  connection  with  each  transaction  that  is  recorded 
in  the  Day  Book  ? 

They  are  used  to  show  whether  the  amount  is  to 
be  debited  or  credited  when  the  amount  is  posted  to 
the  Ledger. 

28.  If  you  sell  merchandise  to  J.  M.  Snoio  on 
account,  what  entry  ? 

Day  book  or  sales  book  entry,  debiting  him  for  the 
amount  of  the  sale. 

29.  If  you  buy  merchandise  for  your  note,  what 
entry  ? 

No  entry  is  required  except  a  simple  memorandum 
of  the  transactions. 

30.  If  you  buy  merchandise  for  cash,  what  en- 
try ? 

It  should  be  entered  in  the  Cash  Book  and  checked 
off,  unless  a  Merchandise  account  is  kept. 

31.  If  you  buy  merchandise  for  your  accept- 
ance, what  entry  ? 

A  simple  memorandum  in  the  Day  Book  without 
arranging  amounts  to  be  posted. 

32.  If  you  buy  merchandise  of  John  Smith  and 
give  in  payment  a  draft  on  James  Black,  what 
entry  ? 

Credit  James  Black  only,  unless  a  Merchandise  ac-  ■ 
count  is  kept,  in  which  case  separate  entries  should 
be  made  for  the  merchandise. 

33.  If  you  sell  merchandise  to  John  Smith  for 
his  note,  what  entry  ? 

Enter  it  in  the  Bill  Book  and  simply  make  a  mem- 
orandum without  arranging  amounts  in  the  Day  Book 
to  be  posted,  unless  you  are  keeping  an  account  with 
Bills  Receivable. 

31f.  If  you  sell  merchandise  to  John  Smith  for 
his  sight  draft  on  James  White,  what  entry  ? 

Cash  book  entry  only,  unless  days  of  grace  are 
allowed. 

35.  If  you  pay  your  rent,  $75,  in  merchandise^ 
what  entry  ? 

No  entry  whatever,  unless  you  are  keeping  Mer- 
chandise and  Expense  accounts. 


COMMISSION  BUSINESS 

592.  The  general  purpose  of  a  Commission  Business  is  to  buy  and  sell  goods  for  others.  For 
definitions  of  the  terms  Consignment,  Consignor,  Consignee,  Commission,  and  Commission  Merchant, 
see  par.  448  to  459  inclusive. 

593.  General  Observations. — Commission  merchants  are  often,  to  a  certain  extent,  jobbers,  as 
they  buy  and  fill  orders  for  their  customers.  Frequently  they  carry  a  stock  of  goods  of  their  own,  but  in 
some  states  they  are  forbidden,  by  law,  to  carry  in  stock  the  same  kind  of  goods  that  they  sell  on  com- 
mission. 

As  a  rule,  it  is  not  good  policy  for  a  commission  merchant  to  deal,  on  his  own  account,  in  the  same 
class  of  goods  that  he  sells  for  others  on  commission,  as  he  may  neglect  making  sales  for  his  customers  in 
order  to  dispose  of  his  own  goods. 

Yet  a  commission  merchant  may  find  it  advisable  to  carry  a  stock  of  goods,  for  the  reason  that  his 
commission  business  may  not  be  sufficiently  extensive  to  enable  him  to  depend  upon  its  profits  alone.  He 
may  also  find  it  necessary  to  keep  in  stock  certain  classes  of  goods  to  fill  the  orders  of  his  customers. 

594.  Rate  of  Commission. — The  rate  per  cent,  of  commission,  charged  by  commission  merchants 
for  buying  or  selling  goods  for  others,  varies  with  the  kind  of  goods,  the  locality,  and  other  circumstances. 
It  usually  varies  from  2^  %  to  8%.  It  is  generally  higher  on  perishable  products,  as  vegetables,  green 
fruits,  etc. ,  than  on  salted  meats,  grains,  potatoes,  etc. 

595.  Consignment  Accounts. — Separate  accounts,  called  Consignment  accounts,  are  kept  with 
each  consignment  received.  These  are  kept  in  the  same  manner  as  personal  accounts,  being  debited  with 
all  charges  and  the  amount  of  the  net  proceeds  when  paid,  and  credited  with  the  amount  of  the  sales.  The 
consignment  accounts  are  numbered  in  the  order  in  which  the  consignments  are  received.  It  should  be 
borne  in  mind  that  a  separate  account  must  be  kept  with  each  consignment,  even  though  a  number  of  con- 
signments may  be  received  from  the  same  person,  or  firm. 

The  object  of  keeping  separate  accounts  with  each  consignment  is  to  facilitate  the  making  out  of  the 
various  account  sales. 

596.  Equated  Date. — Goods  belonging  to  a  consignment  are  frequently  sold  on  time,  unless  the 
consignee  has  been  otherwise  advised  by  the  consignor.  When  time  is  allowed  on  the  sale  of  goods 
belonging  to  a  consignment,  the  proceeds  are  not  usually  considered  due  until  the  expiration  of  the  various 
credit  sales.  In  cases  where  it  is  desired  to  settle  for  consignments  of  this  character  before  the  credits  are 
actually  due,  the  sales  are  equated,  and  the  average  date  is  found,  upon  which  a  settlement  is  effected, 
either  by  note,  draft,  acceptance,  or  cash. 

597.  Ledger  Headings. — In  the  Commission  Sales  Ledger,  the  name  and  address  of  each  con- 
signor should  be  given  in  connection  with  each  ledger  heading  as  follows:  Con.  No.  1,  Samuel  Watson, 
Boston,  Mass.;  Con.  No.  2,  Charles  T.  Benton,  Chicago,  111.,  etc.  See  "Commission  Sales  Ledger," 
page  131.  The  word  "Sales"  is  sometimes  used  instead  of  the  word  "Consignment."  These  consign- 
ment numbers  are  used  by  the  consignee  to  represent  the  goods  while  in  his  possession.  As  the  property 
is  not  his,  he  must  have  some  mark  or  title  to  distinguish  one  consignment  from  another,  and  from  his 
own  goods,  if  he  has  such.  Each  article,  sack,  or  package,  belonging  to  a  consignment,  is  numbered  as 
soon  as  it  is  received,  agreeing  in  this  respect  with  the  consignment  number  used  in  the  ledger  heading. 
In  this  manner,  he  is  able  readily  to  distinguish  one  consignment  from  another;  it  also  saves  time,  as  a 
number  can  be  written  much  quicker  than  a  name. 

598.  Open  Consignments. — All  open  consignments  on  the  commission  merchant's  books  at  the 
end  of  the  year,  must  be  considered  either  as  resources  or  liabilities.  (The  estimate  must  be  made  on  the 
face  of  each  consignment  account  only   and  without  reference  to  any  inventory  that  may  belong  to  it. ) 

The  commission  merchant  handles  goods  on  account  and  at  the  risk  of  the  consignor  only.  If 
he  makes  favorable  sales  the  amount  realized  minus  the  charges  belongs  to  the  consignor.  If  the 
goods  must  be  sold  at  a  loss,  or  if  the  goods  become  a  total  loss,  the  consignor  is  the  sufferer.  The 
only  amount  lost  by  the  commission  merchant  being  his  commission  which  always  depends  on  the 
amount  realized  from  sales. 

Occasionally  an  arrangement  is  entered  into  by  two  or  more  parties,  one  of  whom  is  a  commission 
merchant  and  who  lives  in  the  city  and  furnishes  the  capital,  attends  to  the  selling  and  keeps  the  other 
partners  informed  as  to  the  state  of  the  market,  prices,  etc.  The  duties  of  the  other  partner  or  part- 
ners are  very  similar  to  those  of  purchasing  agent.  He  travels  in  the  country  and  does  the  buying, 
being  guided  in  this  by  the  reports  from  his  partner  in  the  city.  He  ships  to  the  city  the  products 
bought  and  the  gains  on  the  sales  are  shared  according  to  agreement.  Though  this  is  usually  called 
Joint  Account  it  is  really  a  special  partnership, 
[128] 


COMMISSION   BUSINESS  129 

CHARGES 

The  Commission  Merchant's  charges  on  the  different  consignments  are  usually  as  follows: 

599.  Freight. — Freight  is  an  amount  paid  to  a  railroad  company,  etc.,  for  the  transportation  of 
goods. 

600.  Drayage. — Drayage  is  a  charge  for  the  delivery  of  goods  from  the  depot  or  dock  to  the 
place  of  business.  It  may  be  charged  for  work  of  this  kind  done  by  the  Commission  Merchant's  own 
teams. 

601.  Insurance. — It  is  customary  for  a  Commission  Merchant  to  carry  a  sufficient  amount  of  in- 
surance to  cover  all  goods  that  he  has,  or  is  likely  to  have,  in  his  store.  When  this  is  the  case,  he  charges 
the  cost  of  the  insurance  policy  to  an  account  opened  in  the  Ledger  with  "Insurance."  He  then  charges 
each  consignment  a  certain  percentage  for  insurance,  according  to  the  amount  of  goods  and  the  time  they 
remain  on  hand.  In  some  cases,  the  charge  for  insurance  is  the  cost  of  extra  insurance  taken  out  on 
goods  stored  for  better  prices  or  for  the  purpose  of  carrying  them  over  to  another  season. 

602.  Storage. — Storage  is  a  warehouse  charge  made  for  storage  of  goods  while  they  remain  unsold. 

603.  Advertising. — Advertising  may  be  for  a  certain  per  cent  of  the  regular  advertising  of  the 
business,  the  same  as  the  charges  made  for  insurance,  or  it  may  be  for  special  advertising  necessary  on 
perishable  goods,  in  order  to  hasten  the  disposal  of  them. 

604.  Cooperage. — This  is  a  charge  for  the  cost  of  making  or  repairing  such  barrels,  boxes,  etc., 
as  may  be  required  for  the  repacking  or  proper  handling  of  the  goods  sold. 

605.  Discount  for  Advance  Payments. — This  is  a  charge  that  the  Commission  Merchant  fre- 
quently makes  for  drafts  accepted  or  paid,  or  money  remitted  before  the  consignment  has  been  sold,  or  for 
remittances  made  before  the  various  sales  on  time  are  due. 

606.  Exchange. — Exchange  is  a  charge  made  for  the  amount  paid  a  bank  for  bank  drafts,  bills  of 
exchange,  etc. ,  remitted  as  proceeds  of  the  consignment,  or  it  may  be  for  any  cost  necessary  in  making 
collections  and  remittances  connected  with  a  consignment. 

607.  Accepting  Drafts. — Sometimes  the  consignor  draws  on  the  consignee  when  the  consignment 
of  goods  is  not  entirely  sold.  These  drafts  are  usually  accepted  and  charged  to  the  respective  consign- 
ments. In  this  business,  accept  only  such  drafts  as  are  drawn  on  you  through  the  bank,  and  in  accepting 
them  make  it  a  rule  to  postdate  them  two  or  three  days,  thus  giving  you  ample  time  to  sell  the  goods  and 
meet  such  acceptances  at  maturity. 

608.  Cash  Book  Charges. — Debit  each  Consignment  in  the  Cash  Book  at  the  time  of  receiving  it, 
for  the  freight  and  drayage.  See  second  entry  in  Cash  Book,  credit  side.  If  necessary,  use  more  than 
one  line  for  this  entry.  Number  each  Shipping  Invoice  to  correspond  with  the  consignment  number,  but 
continue  to  number  the  invoices  of  your  own  goods  consecutively. 

609.  Miscellaneous  Charges. — For  miscellaneous  charges  affecting  consignments,  see  "Freight, 
Drayage,  and  Express,"  par.  464. 

610.  Student's  Charges. — In  the  Commission  Business  for  this  course,  make  the  following  charges 
on  each  consignment,  computing  the  same  on  the  total  amount  of  sales: 

Commission,  2\  %;  insurance,  \  %;  storage,  \  %;  advertising  £  %;  and  cooperage,  ^  %. 

Use  the  following  form  of  journal  entry  for  these  charges: 

Con.  No.  1 7.97 

Commission   2\ 6. 25 

Insurance  \ 63 

Storage^ 42  , 

Advertising  \  . .  . .    42 

Cooperage  jfc 25 

611.  Posting. — In  posting,  disregard  the  sum  of  these  charges,  $7.97,  and  post  the  separate 
charges  to  the  debit  side  of  the  Commission  Sales  Ledger,  as  the  above  entry  is  posted  in  the  form 
under  par.  614. 

CASH    BOOK 


19 

1  '9 

Apr. 

1 
2 

Balance 
Con.  No.  1 
Con.  No.  1 
Mdse.  Sales 

20 
60 
40 

7614 

18 

Apr. 

1 
2 

Expense,  Rent  1  mo. 
Con.  No.l,F't  28. 48,  Dray  2. 85 
Mdse.,  F't  43.38,  Dray  3.62 
Ins.,  Hartford  Ins.  Co. 
Adv.,  G.  P   Rowell  &  Co. 
Con.  No.  I,  Net  Proceeds 

90 

31 

47 

8 

6 

210 

33 

50 
25 
70 

130 


COMMISSION    BUSINESS 


612.  Commission  Sales  Book — For  a  business  in  which  all  merchandise  is  bought  or  sold  on 
commission,  the  ordinary  Sales  Book  could  be  used,  and  in  the  same  manner  as  usual,  except  that  an  ordi- 
nary journal  entry  would  be  made  for  each  sale  on  account,  the  account  affected  by  the  sale  being  debited 
and  the  consignment  to  which  the  goods  belong  being  credited.  But  as  most  commission  merchants  sell 
goods  of  their  own,  the  Sales  Book  is  usually  ruled  with  three  columns  instead  of  two.  In  using  a  book 
of  this  kind  for  the  first  time,  it  is  necessary  to  exercise  great  care  to  avoid  mistakes.  For  school  purposes, 
use  your  regular  Sales  Book,  ruling  an  extra  column  for  "Items."  The  following  form  of  this  book  will 
give  the  student  a  general  idea  as  to  its  use.  It  should  be  used  as  a  book  of  original  entry,  the  amounts 
being  posted  from  it  direct  to  the  General  Ledger  and  the  Commission  Sales  Ledger. 


COMMISSION  SALES  BOOK 


^i^Csivv'tvcisbij    O.j    sflcoLcJl   J ',    I  <j 


Items. 

Sundries. 

Mdse. 

1.    Sold  our  Mdse  on  ac- 

A. G.  Homer 

count;  no  discount  allowed. 

To  Mdse 

10  brls.  Flour 

4  io 

41 

3  brls.  Salt 

90 

2 

70 

43 

70 

2.    Mdse   belonging  to 
Consignment  No.  1  sold  on 

W.  D.  Palmer 

32 

50 

To  Con.  No.  1 

32 

50 

account-    no   discount    al- 
lowed. 

10  boxes  Oranges 

2  00 

20 

50  bu.  Potatoes 

25 

12 

50 

3.    Mdse   belonging  to 
Consignment  No.  2  sold  for 
Bills    Receivable,    less    3$ 
discount. 

Bills  Receivable 

133 

80 

To  Con.  No.  2 
200  lbs.  D.  Prunes 

10 

20 

135 

80 

120  bu.  N.  Beans 

J    OO 

120 

140 

Less  3% 

4 

20 

4.    Sale  on  account  of  our 

W.  H.  Stimpson 
To  Mdse 
5  brls.  Flour 

168 

40 

Mdse    less  5%,  and  Mdse   of 

Consignment.  No.  2  without 
discount. 

4    20 

21 

10  "    Pork 

12    50 

125 

146 

Less  5% 

7 

30 

138 

70 

138 

70 

To  Con.  No.  2 

3  cas.  Eggs,  90  Doz. 

12 

10 

80 

180  lbs.  D.  Prunes. 

10i 

18 

90 

29 

70 

5.    Sale  on  account  of  our 

G.  P.  Conway 

121 

60 

" 

Mdse  and  Mdse  of  Consign- 

To Con.  No.  3 

ment  No.  3;  no  discount. 

10  brls.  Apples 

J    UO 

15 

180  lbs.  D.  Prunes 

IS 

21 

60 

30 

60 

To  Mdse 

150  bu.  Potatoes 

as 

37 

50 

50    "     N.  Beans 

OS 

47 

50 

85 

85 

6.    Mdse  of  Consignment 

C.  W.  Cadle 

83 

70 

No.  4,    less    10%,    and    our 

To  Con.  No.  4 

Mdse  ,  less  5%,  sold  on  ac- 
count. 

40  bu.  N.  Beans 

90 

36 

Less  10% 

3 

60 

32 

40 

To  Mdse 

60  bu.  N.  Beans 

90 

54 

Less  5% 

2 

70 

51 

30 

51 

30 

7.    Sale    on    account    of 

A.  H.  Manning 

58 

71 

« 

Mdse  belonging  to  Consign- 

To Con.  No.  4 

ments  Nos.  4  and  5,  less  5% 

discount  on  each  consign- 

2 cas.  Eggs,  60  Doz. 

14 

8 

40 

ment. 

10  brls.  Apples 

eo 

15 
23 

40 

Less  5% 

1 

17 

22 

23 

To  Con.  No.  5 

100  bu.  Potatoes 

ss 

23 

140  lbs.  D.  Prunes 

n 

15 

3* 

40 

4  0 

Less  5% 

1 

92 

36 

48 

8.    Shipment  of  our  own 

Shipment  No.  3  —  J.  E.  Dungan,  Troy, 

N.  Y. 

Mdse  to  J.  E.  Dungan,  Troy, 

To  Mdse 

N.  Y» 

200  bu.  Potatoes 

20 

40 

COMMISSION    BUSINESS  131 

613%  Receiving  Book. — This  book  may,  or  may  not  be  used  in  this  business.  A  common  Journal 
will  answer  the  purpose.  When  a  consignment  is  received,  a  short  memorandum  is  made  in  the  Receiving 
Book,  giving  a  brief  description  of  the  goods,  consignor's  name  and  address,  the  amount  paid  for  freight, 
drayage,  etc.     See  the  accompanying  form : 


19 

April 


G.  W.  Ranger,  Con.  No.  1 

Anderson,  O. 

10  Cases  Eggs,  180  doz 

Freight 

Drayage 


614.  Commission  Sales  Ledger. — The  use  of  this  book  is  a  matter  of  convenience  and  not  of 
necessity.  An  account  should  be  opened  in  this  book  with  each  consignment.  All  charges,  drafts, 
accepted  or  paid,  remittances  in  the  way  of  proceeds,  etc. ,  are  posted  to  the  debit  side,  and  all  sales  to  the 
credit  side.  It  is  sometimes  desirable  to  remit  the  proceeds  due  on  a  consignment  before  all  the  goods  are 
sold.  In  this  case  compute  your  charges  on  the  amount  of  sales  then  made,  regardless  of  the  unsold 
goods,  and  make  no  account  whatever  of  the  inventory  belonging  to  such  a  consignment  until  it  is  sold. 
If  you  are  using  the  following  form  of  Commission  Sales  Ledger,  it  will  be  necessary  to  open  a  new  account 
with  such  a  consignment  after  it  has  been,  closed  and  the  proceeds  remitted. 

If  it  is  desirable  at  any  time  to,  transfer  the  proceeds  from  the  Commission  Sales  Ledger  to  the 
credit  of  the  consignor  in  the  General  Ledger,  it  can  be  done  by  making  a  journal  entry,  debiting  the 
consignment  and  crediting  the  consignor.  In  taking  a  Trial  Balance,  the  Commission  Sales  Ledger  must 
be  considered  as  a  part  of  the  General  Ledger;  that  is,  all  open  consignments  in  the  Commission  Sales 
Ledger  must  appear  in  the  Trial  Balance,  the  same  as  open  accounts  in  the  General  Ledger.  See  the 
following  form  of  Commission  Sales  Ledger: 


Consignment  No — 1, — from  5&»^//^W,  ^BoOm.  JL 


aM. 


Date 


April 


L.  F. 


15 


Charges 


Freight 

Drayage 

Commission 

Storage  

Insurance  

Advertising 

Cooperage 

Adv.  Payments 

Dis.  for  Adv.  Pay'ts 
Exch.  on  Proceeds 
Net  Proceeds 


28 
2 
0 


210 
250 


48 

85 
25 
42 
83 

42 
25 


70 


Explanations. 


Date 


i9 

April 


L.  F. 


Sales 


20 

60 

170 


250 


615.  Account  Sales. — An  Account  Sales  is  an  account  rendered  by  the  commission  merchant  to 
the  shipper  of  the  goods,  showing  the  amount  obtained  for  the  consignment  and  the  net  proceeds  after 
deducting  the  charges  for  freight,  commission,  drayage,  etc.     See  the  following  forms: 

As  soon  as  all  of  the  goods  belonging  to  a  consignment  are  sold,  an  Account  Sales  should  be 
made  out,  showing  the  debits  and  credits  connected  with  the  consignment.  It  should  then  be  sent  to  the 
consignor,  and  it  may  or  may  not  be  accompanied  by  the  net  proceeds.  The  object  of  the  Account  Sales 
is  to  give  the  consignor  a  list  of  the  various  charges,  the  rate  of  commission,  the  amount  of  sales,  etc. 
Sometimes  when  a  consignment  meets  with  slow  sale,  the  consignor  will  request  an  Account  Sales  for 
information  regarding  the  consignment,  or  he  may  request  an  Account  Sales  for  the  purpose  of  determining 
tor  what  amount  he  would  be  justified  in  drawing  on  the  consignee,  if  he  found  it  necessary  to  do  so. 


ONION  COMMISSION  CO., 


COMMISSION 

MERCHANTS 


QNCINNATI,  OHIO 

Account  Sales  of  Merchandise  Received CLpT.    G, 10 

From    <b>a.rmJLejL      LLfaJiAon,    Motion,     JJLclSA.,    to  be  sold  on  commission. 


&  LTIJUL  €.m  cn : 

Charges 

Sales 

1 

Freight 

28 
2 
G 

48 
85 
25 
42 
G3 
42 
25 

250 

39 
210 

Find,    enclosed.               mi  ft     o>&FO>k 

for    $2W.7°    as   net  proceeds  of  your  consign- 

Commission  

ment  of  O.p/1.    2,    ig 

Trusting   that  our  disposal  of  this  con- 
signment  will  meet   with  your  approval  and 
secure  your  future  patronage,  we  remain, 

\JLnLon  (—orrunjUi^Lon  &o,t 

Advertising 

Cooperage  

80 

Dis.  for  Adv.  Pay'ts 

Exc.  on  Proceeds 

fiejz  St. 

Net  Proceeds 

70 

The  following  form  of  Account  Sales  is  preferred  by  many  commission  houses  on  account  of  brevity 


H.  P.  McDonnell 


ALL  CONSIGNMENTS   SHOULD   BE    ACCOMPANIED   BY  AN    INVOICE. 


J.  J.  MCDONNELL 


aS2 


71 

BUTTER  and  COOS,  » 
POULTRY, 
. .  GAME, .  . 
TOJITS,    Etc. 


v/retf,  ^MicA., jD^d.   JCj,. 

A\cDONNELL  BROS. 

COMMISSION 


J9 


Reference:  : 
Peninsular  Savings  Bank. 


% 


135  W.  Washington  Street. 


SIB 

Lot  JVb— 4-20.... 


Sold  for  account  of dL.   Oi.   &HjJ>otl1 

Received jQlg..    14, — 19 —       d&ul/baJicL-sJion.,. 

Consignment s> /  '  C 


/  (Loop  go-u/h      120-4-0-80  7Q. 


FREIGHT  &  CTG. 
{ EXPRESS 

COMMISSION  28  1     25 

NET  PROCEEDS  4- 

CHECK  TO  BALANCE 
E.    &  0.  E. 


Dear  Sir:  Enclosed  find  check  to  cover  above  proceeds  which  we  trust  will  be  satisfactory. 

Yours  truly, 
TTiojS) onndJi  /3toA. 

[132] 


5 

97 

28 

1 

4- 

GO 


GENERAL    MERCHANDISE    BUSINESS 


616.  This  is  a  partnership  business  in  which  you  are  to  secure  two  or  more  partners,  allowing-  each 
of  them  a  salary,  including  yourself.  The  amount  of  salary  to  be  paid  each  partner  is  to  be  settled  by 
mutual  agreement. 

617.  You  are  to  invest  your  present  worth,  the  firm  is  to  assume  the  payment  of  your  liabilities, 
and    ou  are  to  guarantee  the  payment  of  all  your  present  outstanding  personal  accounts  and  bills  receivable. 

618.  Books  Used. — The  book  of  original  entry  is  the  Sixteen-column  Journal.  Other  books 
may  be  used  if  the  teacher  prefers. 

619.  Opening  Entry. — Familiarize  yourself  with  the  use  of  the  Sixteen-column  Journal,  then 
arrange  your  opening  entry  in  it,  and  submit  it  for  inspection,  after  which  continue  with  the  work  as 
outlined  in  the  Business  Instructions,  using  the  "  Safeguard  Check  System  "  as  explained  in  Part  II. 

SIXTEEN-COLUMN   JOURNAL 

620.  In  this  business  a  Special  Column  Journal  is  to  be  used,  having  sixteen  columns.  It  is  not 
essential  that  there  should  be  just  this  number  of  columns,  as  the  number  may  be  more  or  less  than  sixteen, 
according  to  the  demands  of  the  business. 

621.  The  book  here  introduced  provides  a  method  of  testing  and  transferring  footings,  which  is  a 
recent  feature  of  accounting  and  saves  much  time  and  labor. 

622.  In  order  to  become  familiar  with  the  use  and  construction  of  this  book,  read  carefully  the 
following  explanations,  referring  whenever  necessary  to  the  form  on  pages  134-139. 

623.  Column  Headings. — A  number  of  column  headings  are  printed  in  the  Sixteen-column 
Journal  form  to  show  how  the  columns  of  a  Columnar  Journal  may  be  used.  But  providing  columns 
on  the  principle  stated  in  paragraph  554,  "that  it  should  be  the  aim  as  far  as  practical  to  bring  out 
the  Business  accounts,"  it  is  suggested  that  beginning  with  the  left-hand  column  on  the  left-hand 
page  of  the  Sixteen-column  Journal,  the  student  write  at  the  top  of  the  columns  in  order:  "Salary," 
"Freight,"  "Advertising,"  "Branch  House."  "Mdse  Dis.,"  "Returns  and  Rebates,"  "Expense," 
"Mdse,"  "Sundries,"  "Cash"  (if  any  of  such  accounts  are  not  already  printed  there).  Beginning  at 
the  right  of  the  explanation  column,  write  in  order:  "Cash,"  "Sundries,"  "Mdse,"  "Returns  and  Re- 
bates," "Mdse  Dis.,"  "Branch  House."  Enter  the  amount  for  each  account  in  its  column.  If  an 
account  should  have  no  column  provided  for  it,  enter  the  amount  in  the  Sundries  Column.     See  par. 

558. 

Posting. — Post  the  items  in  the  Sundries  column  as  directed  in  par.  560.  For  posting  and  post- 
marking footings  or  totals  of  the  several  columns,  see  par.  628. 

624.  Number  Column. — The  vertical  columns  containing  numbers,  are  to  aid  the  bookkeeper  to 
find  readily  the  proper  place  to  enter  the  amounts.  Thus  the  credit  for  W.  S.  Hull,  of  $127.50,  is  on  line 
16,  and  its  place  is  easily  found  by  locating  this  line  in  the  column  reserved  for  his  account. 

625.  Testing  Footings. — It  will  be  noticed  that  the  footings  of  the  several  columns  are  entered 
diagonally.  This  admits  of  their  being  added  horizontally.  The  totals  of  the  footings  of  the  respective 
pages  should  of  course  agree,  thus  affording  a  trial  balance  of  the  book.  See  the  total  footings  in  the 
form. 

626.  Transfer  of  Footings.— It  will  be  observed  that  after  the  first  leaf,  the  leaves  of  the  book 
are  alternately  shortened  at  the  top  and  bottom.  This  device  enables  the  accountant  to  effect  a  transfer  of 
footings  without  rewriting  them.  When  the  second  leaf  is  turned,  the  footings  of  the  first  debit  page  are 
visible,  owing  to  the  shortening  of  the  second  leaf  at  the  bottom.  When  the  second  debit  page  is  filled, 
the  columns  are  added  from  bottom  to  top,  the  footings  of  the  first  debit  page  being  included,  and  the  totals 
being  recorded  at  the  top  of  the  page.  When  the  third  leaf  is  turned,  the  totals  of  the  second  debit  page 
are  visible,  owing  to  the  shortening  of  the  third  leaf  at  the  top,  and  these  totals  are  included  when  the 
third  debit  page  is  added  from  the  top  downward,  the  debit  footings  being  transferred  thereafter  in  the 
same  manner. 

The  credit  footings  are  transferred  in  the  same  manner. 

627.  Cash  Balance. — In  the  space  below  the  explanation  column,  provision  is  made  for  balancing 
the  cash  whenever  the  columns  are  added. 

If  desired,  the  Cash  columns  may  be  ruled  up  and  closed  at  any  time. 

[133] 


134 


SIXTEEN-COLUMN  JOURNAL 


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140 


GENERAL  MERCHANDISE  BUSINESS 


628.  Ledger  Folio  Columns. — Vertical  ledger  folio  columns  are  provided  for  the  entries  in  the 
sundries  column,  and  a  horizontal  folio  column  extends  across  the  foot  of  each  page  for  recording  the 
ledger  pages,  whenever  it  is  desired  to  post  the  footing  of  the  various  columns. 

629.  Dropping  or  Changing  Column  Titles. — If  it  is  found  desirable  to  discontinue  the  keeping 
of  a  given  account  in  any  column,  all  that  is  necessary  is  to  post  the  footing,  and  either  leave  the  column 
blank  thereafter  or  substitute  another  account. 

630.  Cash  Balance  Carried  Forward.— For  entering  "Cash  Bal.  on  hand,  or  bringing  down 
Cash  Bal.  on  hand,  after  ruling  up  the  Columnar  -journal,  see  par.  557. 

631.  Daily  Totals. — The  columns  should  be  totaled  daily  in  pencil  and  the  total  of  the  debit 
columns  compared  with  the  total  of  the  credit  columns.     See  par.  561. 

632.  Check  Figure  Column. — Note  that  a  Check  Figure  column  is  provided  on  the  left  and 
on  the  right  of  the  explanation  column,  and  one  of  the  Check  Figure  methods  may  be  used  if  the 
teacher  so  directs. 

633.  Safeguard  Check  Systems. — Any  one  of  the  Safeguard  Check  Systems,  explained  else- 
where in  this  book,  may  be  used  if  the  teacher  so  elects. 


CASH  BOOK 


Page  24. 


19 
May 


B5 
86 


Balance 

Mdse  Sales 

J.  P.  Lawley  on  acct. 

Bills  Rec,  W.  W.  Ely's  note  No.  6,  B.  B.  29 

Mdse  Sales 

A  Spencer  in  full  of  acct. 

E.  K.  Isaacs  on  acct. 

Shipment  No.  3,  part  proceeds 

Bills  Rec,  C.  J.  Mast's  note,  B.  B.  30 

Mdse   Sales 


Dr. 


ck. 

3 
2 

7 
6 
0 
10 
8 
9 
1 
G 


52 


3,249 
172 

4,173 
465 

1,324 
648 
246 
26 
917 
649 


11,874 
8 


03 


JOURNAL 


Page  57. 

19 

ck. 

May 

4 

Mdse 

To  Cash 

6 

249 

21 

249 

21 

95 

Cash 

To  Mdse. 

2 

172 

39 

172 

39 

Mdse 

To  Cash 
"  J.  S.  Smith, 

7 
7 
0 

4,173 

91 

4,000 
173 

00 
91 

95 

Bills  Rec. 

To  Mdse 
"   Cash 

6 
4 
2 

465 

25 

400 
65 

00 
25 

HERCHANDISE 


19 

ck. 

19 

ck. 

May 

4 

J. 

57 

6 

7 

13 
2 

249 

4,173 

21 
91 

May 

1 
4 

C.  B. 
J. 

24 
57 

2 
0 
6 
2 
4 

14 
3 

172 
1,324 
649 
172 
400 

39 

84 
83 
39 
00 

4,423 
2 

12 

2,719 
3 

45 

GENERAL  MERCHANDISE  BUSINESS  141 

634.  Trial  Balance. — The  use  of  the  Check  System  affords  a  short  and  simple  method  of  taking 
monthly  trial  balances.  Instead  of  finding  the  footings  of  the  ledger  accounts,  the  footings  of  the  check- 
number  columns  are  taken.  This  is  quite  as  reliable  a  test  of  the  Ledger  as  is  the  ordinary  trial  balance, 
and  it  is  much  more  readily  prepared. 

635.  General  Merits  of  a  Check  Figure  System, — The  fact  that  one  or  another  of  the 
Safeguard  Check  Systems  presented  elsewhere  in  this  book  is  used  by  large  numbers  of  accountants 
and  bookkeepers  is  a  sufficient  guaranty  of  the  practical  value  of  a  Safeguard  System.  A  few  years 
ago  certain  persons  went  about  the  country  "selling"  some  of  these  methods  at  a  fancy  price.  Many 
business  meh  have  paid  as  much  as  $ioo  for  a  Safeguard  Check  System.  An  attempt  was  even  made 
to  "patent"  them,  and  to  collect  a  royalty  from  those  accountants  or  business  men  that  were  using 
any  one  of  them.  It  is  perhaps  needless  to  remark  that  a  mathematical  principle  is  not  subject  to 
patent. 

636.  In  the  hands  of  an  accountant  or  bookkeeper  that  has  acquired  a  ready  familiarity  with 
the  principle  a  Check  System  may  be  very  profitably  employed  to  prevent  those  costly  and  vexatious 
delays  that  are  sometimes  occasioned  to  a  business  when  the  books  are  found  not  to  be  in  balance. 
Every  accountant  and  bookkeeper  should  at  least  be  familiar  with  the  application  of  these  systems, 
so  that  he  may  apply  either  one  when  required  to  do  so. 

BRANCH    HOUSE 

637.  The  term   "  Branch  House"  is  applied  to  the  separate  branches  of  a  firm,  which  are  usually 
•  located  in  distant  cities.     The  central  concern  is  known  as  the  "  Main  House." 

638.  Branch  House  Account. — On  the  books  of  the  Main  House,  an  account  is  opened  with  the 
Branch  House,  and  this  account  is  kept  in  the  same  manner  as  a  personal  account.  The  Branch  House 
is  charged  with  everything  furnished,  as  goods,  cash,  store  fixtures,  etc.,  and  credited  with  everything 
that  it  furnishes  the  Main  House. 

639.  Prices. — The  Main  House  frequently  orders  merchandise  from  the  Branch  House  with 
instructions  for  the  original  bill  to  be  sent  to  the  Main  House,  and  a  duplicate  bill  without  prices  to  be  sent 
with  the  goods  to  the  Branch  House.  The  reason  for  doing  this  is  that  the  Main  House  may  have  special 
prices  that  the  proprietors  do  not  care  to  make  known  (especially  if  the  manager  of  the  Branch  House  is 
likely  to  go  into  business  for  himself) ;  or  they  may  desire  to  fix  their  own  prices  on  the  goods  in  a  private 
way.  When  this  is  done,  it  is  necessary  for  the  Main  House  to  make  out  a  bill,  with  prices,  and  send  it  to 
the  Branch  House  before  the  goods  can  be  marked.  Some  firms  debit  the  Branch  House  for  the  goods 
that  they  furnish  at  a  profit,  although  the  proper  way  would  be  to  charge  them  at  cost,  which  is  usually 
done. 

640.  Branch  House  Bills. — In  case  the  bills  for  goods  that  have  been  bought  on  account  by  the 
Branch  House  are  turned  over  to  the  Main  House  for  settlement,  the  Main  House  debits  the  Branch 
House,  and  credits  the  parties  selling  the  goods  for  the  amount  of  the  various  purchases.  In  the  absence 
of  this  plan,  a  statement  showing  the  date,  terms,  of  whom  bought,  and  the  amount  to  be  paid,  is  made 
out  by  the  Branch  House  and  sent  to  the  Main  House,  as  the  original  bills  are  kept  by  the  Branch  House 
for  reference. 

641.  Branch  House  Loss  or  Gain. — If  our  Branch  House  shows  a  gain  at  the  end  of  the  year, 
we  debit  it  and  credit  our  Loss  and  Gain  account.  When  this  is  done,  the  difference  between  the  two 
sides  of  the  Branch  House  account  will  show  a  resource  to  us,  which  amount  should  agree  with  the 
difference  between  the  resources  and  liabilities  of  the  Branch  House.  If  the  gain  is  remitted  at  the  end  of 
the  year,  we  should  debit  Cash  and  credit  the  Branch  House.  This  entry  may  be  made  either  before  or 
after  debiting  the  Branch  House  and  crediting  Loss  and  Gain.  In  closing  our  books  at  the  end  of  the 
year,  we  always  leave  the  account  open,  classifying  it  as  a  resource  in  our  business. 

If  the  Branch  House  account  shows  a  loss  at  the  end  of  the  year,  we  debit  Loss  and  Gain  and  credit 
the  Branch  House  for  the  amount  of  the  loss,  allowing  the  account  to  stand  open,  classifying  it  as  a 
resource,  in  closing  our  books,  after  adjusting  the  loss  and  gain  for  the  year.  The  difference  between  the 
two  sides  of  the  account  shows  the  present  worth  of  the  Branch  House. 

642.  Branch  House  Books. — The  books  are  opened  the  same  as  are  the  books  in  any  other 
business,  crediting  the  Main  House  for  the  investment;  also  debiting  or  crediting  it  at  the  end  of  the  year 
for  the  net  loss  or  gain.  The  Main  House  account  should  be  treated  in  every  respect  the  same  as  you 
would  treat  \he  proprietor's  account  in  any  business.  When  merchandise  is  bought  by  the  Branch  House 
and  the  bills  are  sent  to  the  Main   House  to  be  paid,  Merchandise  is  debited  and  the  Main  House  is 


142 


GENERAL  MERCHANDISE  BUSINESS 


credited.     In  other  cases,  as  when  you  buy  merchandise  on  account,   you  should  debit  Merchandise 
and  credit  the  person  or  firm  from  whom  it  was  purchased,  as  in  any  other  business. 

Sometimes  a  Branch  House  for  the  sale  of  farming  implements,  etc.,  is  conducted  by  a  person  who 
is  handling  a  different  line  of  goods  for  himself.  When  this  is  the  case,  it  is  seldom  worth  the  trouble 
and  expense  to  keep  a  separate  set  of  books  for  each  business.  An  account  is  opened  with  the  Main 
House,  also  one  with  "B.  H.  Merchandise,"  which  is  debited  for  the  goods  received  from  the  Main  House, 
the  "Main  House"  account  being  credited.  When  these  goods  are  sold,  we  debit  our  customers,  or 
whatever  we  receive,  and  credit  "B.  H.  Merchandise." 

All  dealings  with  the  Main  House  should  be  limited  as  nearly  as  possible  to  these  two  accounts, 
"Branch  House  Merchandise"  and  "Main  House."  However,  if,  the  Main  House  should  furnish  a  team 
for  use  in  the  business,  perhaps  it  would  be  well  to  keep  an  account  with  "Main  House  Chattels." 

It  may  or  may  not  be  desirable  to  keep  an  account  with  "B.  H.  Expense."  In  the  absence  of  this 
account,  all  items  of  that  character  are  charged  directly  to  the  Main  House  account. 

The  Main  House  generally  requires  the  Branch  House  to  keep  loose-leaf  Cash  and  Journal  records, 
with  carbon  duplicates.  The  originals  are  sent  to  the  Main  House,  daily,  and  the  duplicates  are  retained 
as  the  records  of  the  Branch  House. 

BRANCH  HOUSE  BALANCE  SHEET 

643.  At  the  end  of  the  year,  an  inventory  of  the  Branch  House  property  should  be  taken,  and  each 
account  closed  as  though  it  were  an  account  in  our  business,  excepting  that  the  loss  or  gain  is  carried  to 
the  Main  House  account,  which  will  then  show  the  actual  present  worth  of  the  Branch  House. 

£$#anm  *ytou4e  JjJalance  tj/ieet,  Erefit.£,  Sty . 


RESOURCES 

Cash # 

Personal  Account,  per  separate  list  . . . 

Mdse   Inv'ry 

Furniture  and  Fixtures,  Inv'ry 

Chattels,  Inv'ry 

LIABILITIES 

Personal  Accounts,  per  separate  list 

Bills  Payable,  per  B.  B 

Present  Worth  of  Branch  House 

GAINS 

Mdse 

Int.  and  Dis 

Shipment  No.  1 

LOSSES 

Expense 

Collections 

Advertising 

Net  Gain  of  Branch  House 

Branch  House  credits 

"  "        debits 

"  "        net  credit 

"  "  "  gain 

Present  Worth  of  Branch  House 


820 
245 
965 
245 
150 


945 

785 


892 
24 
14 


158 
10 
G5 


437 
437 
000 
G95 


60 

25 
25 

75 


42G 


730 


695 


931 


235 


695 


695 


75 


82 


20 


27 


93 


93 


644.  Petty  Account. — A  Petty  account  is  an  account  kept  in  the  Ledger  under  the  heading 
"  Petty  Account "  or  "Miscellaneous  Account,"  for  the  purpose  of  entering  all  small  sales  on  account 
to  customers,  who  seldom  buy  of  us  except  for  cash.  In  sales  of  this  character,  it  is  not  worth  while  to 
open  an  account  for  one  charge.  If  we  desire  to  charge  John  Smith  in  the  Petty  Account,  the  entry 
would  be  made  in  the  Sales  Book  thus:     "  Petty  Account — John  Smith,"  or  "  P.  acct. — John  Smith." 

In  posting  to  the  Ledger,  the  name  of  the  person  charged  is  written  in  the  explanation  column,  and 
when  the  account  is  settled,  the  credit  is  entered  on  the  same  line  as  the  debit,  writing  in  the  explanation 
column  the  word  • '  Paid. "  See  charge  of  $3  against  John  Smith  in  the  accompanying  form  of  Petty 
account. 

Sometimes  small  articles  are  bought  without  being  paid  for.  We  record  the  purchase  in  the  Petty 
account  by  crediting  the  person  of  whom  we  bought  the    article,  and  when  settled   for,  marking  the 


GENERAL  MERCHANDISE  BUSINESS 


143 


account  paid  on  the  debit  side.  See  W.  S.  Hull's  credit  in  the  following  form.  Occasionally  these 
accounts  are  settled  part  at  a  time.  When  this  is  done,  the  entries  should  be  made  the  same  as  in  B.  H. 
Gill's  account  in  the  form. 

PETTY  ACCOUNT 


19 

20 

21 
22 

24 
27 
26 

J.  M.  Moore . . .  - 

120 

122 

123 

124 

65 

126 

4 
1 
3 
1 
2 

2 

4 

20 
50 

40 
25 
75 
25 
60 

19 

June 

June 

25 

22 

28 
29 

Paid 

63 

85 

3 

2 

2 
2 

D.  B.  Rice 

D.  M.  Ferry . . , 

W.  S.  Hull 

I.  H.  Wall 

David  Watt 

Paid .             

25 

B.  H.  Gill.. 

j  Mdse  returned 

W 

j Cash  

35 

PRIVATE  ACCOUNT  IN  PARTNERSHIP 

645.  The  learner  has  been  shown  the  use  and  the  necessity  of  "a  Private  Account  in  single  pro- 
prietorship, par,  407,  410.  The  necessity  for  such  accounts  in  a  partnership  is  in  many  cases  the  only 
check  against  recklessness  and  extravagance  in  withdrawals  and  use  of  partnership  property  by  partners. 

646*  The  disposition  of  withdrawals,  interest  on  withdrawals,  salary  of  partners,  the  firm's 
debts  paid  by  a  partner,  partners'  debts  paid  by  the  firm,  the  amount  of  withdrawals,  how  the  private 
accounts  are  to  be  closed,  are  matters  for  the  partnership  agreement  to  state  clearly,  to  prevent 
future  misunderstandings. 

647.  Transfer  Entry. — When  for  any  purpose  it  is  desired  to  transfer  a  given  amount  from 
a  proprietor's  Stock  account  to  the  Private  account,  it  may  be  done  by  simply  making  the  transfer 
entries  in  the  Ledger,  but  it  is  better  to  make  a  journal  entry  as  follows : 

H.  B.  Burton,  Stock $382.90 

H.  B.  Burton,  Private $382.90 

Amount  set  aside  from  Stock  account  for  private  use. 

648.  Each  partner  should  use  partnership  money  and  property  as  if  he  were  an  employee. 
Each  partner  should  be  treated  as  any  other  customer  and  should  be  debited  for  all  money  or  other 
property  that  he  may  take  or  partnership  property  that  he  may  use,  as  partnership  team  for 
hauling  personal  property,   etc. 

649.  Interest  Debits  and  Credits.  —  Some  prefer  to  charge  each  partner  with  interest  on  with- 
drawals of  cash  or*  other  property,  and  to  credit  him  with  interest  on  additional  investments  until  the 
next  profit-taking  period.  Then  if  one  partner  -nvests  more  than  his  share,  he  is  allowed  interest 
on  the  excess.     If  less,  he  is  charged  interest  on  the  amount  less  than  his  proportion. 

Again,  the  agreement  may  be  that  interest  shall  not  be  reckoned  on  withdrawals  or  additional 
investments,  but  that  profits  shall  be  apportioned,  on  the  basis  of  the  relative  investments,  at  the 
end  of  each  six  months'  period. 

Sometimes  salaries  are  allowed  each  partner.  All  of  these  matters  should  be  mutually  agreed 
on  and  included  in  the  written  copartnership  agreement. 

650.  Closing  the  Private  Account. — A  Private  account  may  be  closed  by  any  one  of  the  follow^ 
ing  methods: 

1.  At  the  end  of  the  year  the  proprietor's  net  loss  or  gain  in  the  business  may  be  carried  directly  to 
the  Private  account.  The  balance  of  this  account  is  then  carried  to  the  Stock  account,  which  is  then  ruled 
up  and  the  balance  brought  down  as  usual.     The  Private  account  is  also  ruled  up. 

2.  The  loss  or  gain  may  be  carried  directly  to  the  Stock  account,  the  Private  account  then  being 
closed  into  the  Stock  account.      Of  these  two  methods,  we  consider  the  first  one  preferable. 

3.  After  the  loss  or  gain  has  been  transferred  to  the  Private  account,  this  account  may  be  ruled  Up 
and  the  balance  brought  down  without  transferring  it  to  the  proprietor's  Stock  account. 

In  case  of  a  single  proprietor,  the  Private  account  is  sometimes  carried  to  the  Loss  and  Gain  account, 
and  then  any  profit  or  loss  of  the  business  is  transferred  to  his  Stcck  account;  but  this  method  of  conduct- 
ing a  Private  account  is  not  commendable. 


144 


GENERAL  MERCHANDISE  BUSINESS 


The  Private  account  should  never  be  considered  as  a  resource  or  a  liability  of  the  business,  as  it  is 
merely  a  branch  of  the  Stock  account. 

651.  Opening  Books  with  a  Private  and  Stock  Account — If  it  be  desired  to  open  the  books 
with  a  Private  account,  the  opening  entry  in  the  Journal  should  be  in  form  as  follows: 

Resources  (enter  these  separately) $12,000 

To  Liabilities  (enter  these  separately) $6,480 

W.  S.  Hull's  Private  Account 520 

W.  S.  Hull's  Stock  Account 5,000 


652.  Private  Bank  Account — A  Private  bank  account  is  merely  the  personal  bank  account  of  a 
partner  or  stockholder  of  a  company.  This  account  is  not  only  a  matter  of  convenience,  but  frequently  of 
necessity,  as  the  individual  bank  account  of  a  partner  or  stockholder  must  be  kept  separate  from  the 
bank  account  of  the  concern. 

The  following  Balance  Sheet  shows  the  method  of  apportioning  the  gain  to  partners'  accounts, 
as  per  partnership  agreement : 

Balance  Sheet  or  Financial  Exhibit  of  C.  L.  Martin  &  Co.'s  Business,  Aug.  31,  19 


L  F 

LEDGER  ACCOUNTS 

TRIAL  BALANCE 

BALANCE  OF  BALANCES 

LOSS  AND  GAIN  ACCT. 

Debits 

Credits 

Resources 

Liabilities 

Losses 

Gains 

1 

C.  L.  Martin,  Stock     . 

7033 

10 

2 

D.  P.  Wayne,  Stock 

200 

7550 

4 

Cash 

21289 

10131 

30 

11157 

70 

5 

Bills  Receivable 

21050 

15050 

6000 

8 

Mdse 

33275 

50 

28200 

50 

6210 

1135 

9 

Chattels 

375 

325 

50 

10 

C.  R.  Trudgeon 

1520 

50 

1125 

60 

394 

90 

11 

W.  E.  Fowler 

945 

50 

560 

50 

385 

13 

G.  W.  Riley 

1125 

75 

1325 

75 

200 

14 

M.  Mordecai 

295 

80 

395 

80 

100 

15 

Bills.  Payable 

30080 

50 

38080 

50 

8000 

16 

Expense 

250 

250 

17 

Interest  and  Discount 

23 

50 

37 

50 

40 

50 

20 

• 

34 

50 

20 

S.  Ryden 

380 

50 

380 

50 

21 

K.  W.  Weir 

560 

560 

110431 

05 

110431 

05 

24513 

10 

9260 

50 

300 

1169 

50 

1 

C.  L.  Martin,  Partner 

Cr.  by  Net  Stock  Acct. 

7033 

10 

Cr.  by  y2  Net  Gain 

434 

75 

434 

75 

Present  Worth 

7467 

85 

7467 

85 

0 

D.  P.  Wayne,  Partner 

Cr.  by  Net  Stock  Acct. 

7350 

Cr.  by  y2  Net  Gain 

434 

75 

434 

75 

Present  Worth 

7784 

7? 

7784 

75 

Firm's  Present  Worth 

15252 

60 

15252 

60 

24513 

10 

24513 

10 

1169 



50 

1169 

50 

Note. — If  there  should  be  a  loss  and  it  should  be  required  to  be  closed  into  Impairment  Fund,  or  Balance, 
etc.,  it  would  be  better  to  use  the  form  of  Financial  Exhibit  shown  on  page  107.  If  the  showing  is  to  be  made 
without  closing  the  Ledger,  the  form  of  Financial  Exhibit  illustrated  on  page  108  would  be  more  convenient. 


THE  VOUCHER  SYSTEM  OF  KEEPING  ACCOUNTS 

ILLUSTRATED  BY  THB  OPERATIONS  OP 

THE    BOSTON    TANNING    COMPANY  i 

653.  A  Voucher  is  any  written  or  printed  document  that  serves  to  vouch,  to  give  evidence  of 
the  truth  of  an  account  or  of  the  payment  of  an  account  or  both.  In  the  Voucher  System  it  is 
a  special  form  of  receipt. 

654.  The  Voucher  System  is  a  method  of  keeping  accounts  in  which  the  Voucher  Record  is 
introduced  to  take  the  place  of  accounts  with  creditors.  As  the  Voucher  Record  represents  accounts 
with  creditors,  such  accounts  are  not  opened.  The  invoices  of  materials,  machinery,  or  other  articles 
bought,  and  also  itemized  statements  for  outlays  necessary  to  carry  on  the  business,  are  kept  on  file, 
in  a  special  form  of  receipt  known  as  a  Voucher. 

655.  The  Voucher  Record  is  a  special  column  Journal.  By  looking  at  the  "Total  Column" 
in  the  Voucher  Record  we  can  see,  at  any  time,  the  total  amount  that  would  be  carried  to  the  credit 
of  creditors'  accounts  if  such  accounts  were  kept.  This  amount,  as  illustrated  by  the  Voucher  Record 
for  the  first  six  vouchers  entered,  is  $1434.72. 

By  looking  at  the  total  of  the  two  columns,  "Cash"  and  "Sundry  Payments,"  on  the  right  of 
the  Voucher  Record,  we  can  see  the  amount  of  payments  that  would  be  carried  to  the  debit  of  credi- 
tors' accounts,  if  the  accounts  were  kept  in  the  usual  way.     The  sum  of  these  two  totals  is  $806.76. 

The  difference  between  the  total  of  the  "Total  Column,"  and  the  sum  of  the  two  totals  of  "Cash" 
and  "Sundry  Payments"  will  show  the  total  amount  yet  due  creditors;  and  this  amount  should  agree 
with  the  amount  of  Unpaid  Vouchers.  The  difference  between  $1434.72  and  $806.76  is  $627.96. 
The  Voucher  Record  shows  that  Voucher  No.  1,  for  $582.51,  and  Voucher  No.  6,  for  $45.45,  have 
not  been  paid.  These  Unpaid  Vouchers  total  $627.96,  which  shows  that  the  Voucher  Record  agrees 
with  the  actual  facts.     This  test  should  be  made  daily  by  the  student. 

656.  Checks  with  Cash  Book. — This  test  checks  also  with  Vouchers  paid  as  shown  by  the 
credit  side  of  the  Cash  Book. 

657.  Proof  of  Voucher  Footings. — The  footings  of  the  several  columns  should  be  added 
daily  to  see  that  their  total  equals  the  total  of  the  Total  Column.     See  Voucher  Record  for  illustration. 

658.  How  to  Operate  the  Voucher  System.  The  Voucher  Record- — To  conduct  this  sys- 
tem of  keeping  accounts  with  the  greatest  facility,  it  is  necessary  to  have,  in  addition  to  the  main 
books  used  in  other  systems,  a  Voucher  Record,  a  columnar  journal,  in  which  is  a  column  for  each 
kind  of  material  used  and  for  each  class  of  outlay  or  expense  incurred  in  carrying  on  the  business 
The  Voucher  Record  contains  a  record  of  each  voucher  issued,  beginning  with  No.  1  and  numbering 
consecutively. 

Some  material  may  be  bought  or  expense  incurred  against  which  we  may  have  an  offset;  that 
is,  we  may  buy  material  of  some  one  that  owes  us,  and  then  set  up  their  indebtedness  to  us  against 
what  we  owe  them.  This  is  more  often  called  a  Contra  account.  A  column  is  often  provided  on 
the  Voucher  Record  for  such  accounts.  In  case  there  is  no  Contra  Column  provided  for  on  the 
Voucher  Record,  such  item  may  be  set  in  a  column  headed  "Journal  column  for  all  accounts  ex- 
cept Cash."  Again,  some  miscellaneous  accounts  are  most  certain  to  come  up  for  which  no  column  is 
provided,  and  for  this  reason,  it  is  necessary  to  have  a  column  headed  "Sundries." 

In  addition  to  the  two  columns  just  named,  the  Voucher  Record  will  have  many  or  few  columns, 
depending  on  the  nature  of  the  business  and  the  judgment  of  the  bookkeeper,  as 'to  how  minutely  he 
desires  to  classify  the  materials  used  and  the  expenses  incurred  in  carrying  on  the  business. 

In  this  system,  the  invoices  of  purchases  and  of  other  outlays  necessary  to  carry  on  the  business 
are  kept  in  files.  No  accounts  are  opened  in  the  Ledger  with  creditors;  but  instead,  when  the  invoices 
are  paid,  Cash  is  credited  and  the  different  classes  of  goods  or  materials  purchased  or  used,  or  expenses 
incurred  are  debited. 

659.  How  to  use  the  Voucher  Record. — When  an  invoice  is  received  or  an  outlay  is  to  be 
incurred,  the  items  are  checked,  verified,  by  the  proper  persons.  Then  a  voucher  is  made  out,  and 
Certified  by  the  proper  authorities,  after  which  the  distribution  of  the  items  to  the  proper  accounts 
should  be  made  on  the  back  of  the  voucher;  and  from  this  distribution  the  entries  should  be  made  on 
the  Voucher  Record.     See  Voucher  illustrations. 

After  the  entries  have  been  made  on  the  Voucher  Record,  the  invoice  or  the  statement  for  which 

[145] 


146 


MANUFACTURING 


the  outlay  is  to  be  made,  is  folded  inside -the  voucher  and  all  the  documents  bearing  on  this  transac- 
tion or  set  of  related  transactions  the  payment  of  which  has  been  made  by  one  check  are  filed  together 
according  to  the  scheme  for  filing.     The  check  would  then  indicate  the  invoices  for  which  it  is  payment. 

In  your  schoolwork,  you  should  file  the  vouchers  in  your  Daily  Reminder,  using  one  compart- 
ment for  "Paid  Vouchers"  and  another  for  "Unpaid  Vouchers." 

(>60.  Paying  an  Invoice. — When  the  invoice  is  to  be  paid,  a  Voucher  Check  is  made  out,  and 
sent  to  the  creditor.  The  Voucher  Check  is  an  ordinary  check  with  a  statement  on  the  left-hand 
end  containing  an  itemized  list  of  the  articles  in  the  invoice  for  which  the  check  is  to  be  full  pay- 
ment. Or  the  check  may  contain  on  its  face:  "In  full  payment  for  Voucher  No.  — ."  The  check 
will  have  to  be  indorsed  before  the  creditor  can  get  the  money  on  it.  This  insures  the  return  of  the 
Voucher  Check  through  the  bank.  When  the  Voucher  Check  is  returned,  it  is  inclosed  in  the  voucher 
with  the  invoice  or  other  document  for  which  it  is  payment.  The  voucher  and  its  voucher  check 
constitute  complete  evidence  of  payment. 

If  several  invoices  are  to  be  paid  at  the  same  time  and  to  the  same  creditor  and  contain  the 
same  terms,  a  Voucher  Check  may  be  given  for  the  combined  amount  and  the  Voucher  Check  would 
then  indicate  the  total  of  the  items  of  the  invoices  for  which  it  is  payment.  This  is  done  to  save 
writing  checks  and  the  additional  postings,  as  one  check  and  one  posting  will  answer  for  all.  If  the 
invoices  bear  different  terms  this  could  not  be  done.  The  total  of  sundry  invoices  of  a  miscel- 
laneous and  petty  character,  but  bearing  no  discount,  may  be  paid  with  one  check. 

Record  of  checks  issued  in  payment  of  vouchers,  etc.,  may  be  kept  on  the  stub  of  the  Check 
Book  or  in  a  Check  Register,  or  in  a  Banking  Ledger.  In  case  of  payment  of  Voucher,  the  only  record 
necessary  on  the  stub  of  Check  Book  is  "Payment  of  Voucher  No.  — ." 

As  the  different  vouchers  are  paid  they  are  entered  in  the  Cash  Book,  credit  side. 

661-  Postings. — The  learner  must  remember  that  there  are  various  ways  of  arranging  books 
for  the  Voucher  System  and  that  the  posting  will  vary  with  the  planning  of  the  system  of  books. 

662.  Posting  from  the  Voucher  Record.  Debits. — The  Voucher  Record  is  a  columnar 
journal,  to  classify  the  raw  material  and  the  items  of  expense  of  conducting  the  business.  At  the 
end  of  the  month  or  at  the  close  of  a  page,  an  account  is  opened  in  the  Ledger  with  each  column 
named  in  the  Voucher  Record;  as,  columns,  A,  B,  C,  D,  E,  F,  G,  H,  I,  J,  K,  L,  M,  N,  O,  etc.  For 
brevity  and  also  for  the  purpose  of  concealing  the  cost  of  material  or  article  or  outlay  for  expense 
from  the  clerks  or  others,  the  columns  representing  the  different  materials  or  items  of  outlay  may  be 
given  a  letter  or  a  number  and  the  column  on  the  Voucher  Record  to  be  charged  for  the  outlay  is 
designated  by  a  letter  or  a  number  on  the  back  of  the  voucher.  That  is  to  say,  an  account  is  opened 
with  "Hides,"  and  the  total  of  that  column,  $574.17,  as  illustrated  by  the  total  of  the  first  six  vouch- 
ers, is  posted  to  the  debit  of  that  account.  In  like  manner  an  account  is  opened  with  "Kip 
Skins,"    "Calf   Skins,"   and  so  on  through  the  list  and  the  total  of  each  column  posted  to  the 


BOSTON  TANNING  COMPANY 


A 

'   B 

c 

D 

E 

F 

Date 

In  whose  favor  Pay- 
ment is  to  be  made 

LP 

Journal  Column  for  all  Credits 
Excepting  Cash 

Vch 
No. 

Total 
Column 

Hides 

Kip 

Skins 

Calf 
Skins 

Goat 
Skins 

Sheep 
Pelts 

Tan 
Bark 

19 

LUg 

1 

Am.  Mdse  Co. 

1 

582 

51 

254 

31 

288 

2 

Am.  Mdse  Co. 

26 

Bills  Pay  No.  29 

265 

50 

2 

265 

50 

38 

40 

32 

40 

168 

3 

Am.  Mdse  Co, 

42 

W.  E.  Fowler,  Dft.  3 

250 

16 

3 

250 

16 

95 

16 

3 

30 

8 

80 

142 

3 

A.  B.  Dun  &  Co. 

4 

241 

15 

224 

70 

3 

Miller  &  Co. 

5 

49 

95 

25 

65 

20 

70 

4 

Am.  Mdse  Co. 

6 

45 

45 

43 

74 

1434 

72 

574 

17 

41 

70 

43 

74 

25 

65 

61 

90 

598 

Ledger  Pages 

MANUFACTURING 


147 


debit  of  its  account.  Then  accounts  will  have  to  be  opened  with  any  item  in  the  Sundries  column,  and 
the  amounts  posted  to  the  debit  side. 

663.  Credits. — An  account  will  have  to  be  opened  with  each  account  in  the  column  headed 
"Journal  column  for  all  credits  except  Cash,"  but  these  accounts  are  credits  and  their  amounts  will 
have  to  be  posted  to  the  credit  side  of  their  respective  accounts;  that  is  to  say,  an  account  is  opened 
with  Bills  Payable,  and  its  amount,  $265.50,  will  be  posted  to  its  credit.  Likewise  an  account  is 
opened  with  W.  E.  Fowler  and  the  amount,  $250.16,  posted  to  its  credit,  and  so  on,  for  any  account 
that  may  appear  in  that  column. 

664.  Accounts  Payable. — At  the  end  of  the  month  an  account  should  be  opened  in  the  General 
Ledger  with  "Accounts  Payable,"  and  the  footing  of  the  "Total  Column,"  as  $1434.72,  posted  to  its 
credit;  and  the  total  of  the  two  columns,  "Cash,"  and  "Sundry  Payments,"  as,  $806.76,  posted  to  its 
debit.  The  difference  between  the  debit  and  the  credit  sides  of  this  account  shows  the  amount  of  "Un- 
paid Vouchers,"  and  the  amount  of  the  indebtedness  of  the  business,  except  any  notes  or  mortgages 
outstanding.  In  case  this  account  is  not  kept  the  footings  of  these  columns  are  not  posted.  This 
account  is  kept  as  a  controlling  account;  that  is  to  say,  a  standard  by  which  the  correctness  is  tested. 

665.  Special  Column  Cash  Book. — While  the  ordinary  Cash  Book  may  be  used,  the  labor 
of  operating  the  Voucher  System  will  be  greatly  reduced  by  using  a  Special  Column  Cash  Book. 
See  illustration,   page  149. 

Posting  from  the  Cash  Book — Credits. — The  footing  of  each  column,  except  the  "Mdse  Dis." 
on  Sales,  on  the  debit  or  "Received"  side,  would  be  posted  to  the  credit  of  its  account.  "Mdse 
Dis."  on  Sales  is  a  charge  against  sales,  and  is  therefore  a  debit. 

The  Ledger  pages  to  which  each  footing  is  posted  are  set  in  the  first  line  below  the  double  rule 
and  are  indicated  on  the  Cash  Book  illustration  by  a  dagger  (j*)  set  before  the  page  No.  A  single 
red  ink  line  is  drawn  across  the  Cash  Book  below  the  folio  references  and  the  Balance  carried  for- 
ward is  brought  down  below  the  single  red  ink  line,  in  order  that  no  entry  may  be  made  on  the  folio 
line,   and  to  make   the  folio  references  stand  out  that  they  may  be  seen  at  a  glance. 

6,66.  Debits. — Every  payment  with  its  Check  No.  and  its  Voucher  No.,  if  paid  on  a  Voucher,  is 
entered  on  the  credit  side.  If  any  amount  of  cash  is  paid  out  that  is  not  paid  on  a  Voucher,  in 
order  to  find  the  total  cash  paid,  for  balancing  the  Cash  Book,  the  amount  of  Cash  paid  on  Vouchers 
is  set  in  the  Cash  column  under  "Not  paid  on  Vouchers,"  and  the  total  found. 

The  several  amounts  under  "Vouchers  Paid"  are  posted  to  the  Voucher  Record  under  "Explain 
When  and  How  Paid." 

The  footings  of  the  other  columns  on  the  credit  or  "Paid"  side,  except  "Mdse  Dis."  on  Purchases, 
are  posted  to  the  debit  of  their  respective  accounts.  "Mdse  Dis."  on  Purchases  reduces  the  cost  of 
purchases  and  is  therefore  a  credit. 

General. — The  footing  of  the  "Total   Sales  Cr."  column   on  the  debit  side,  and  of  the  "Total 


VOUCHER    RECORD    FOR 


.19. 


0 

H 

1 

J 

K  ' 

L 

M 

N 

C 

Salt 

Bate 
Material 

Tallow 

Fish 
Oil 

Caout- 
chouc 

Sulphuric 
Acid 

Iron 
Filings 

Pay 
Roll 

Sundries 

Explain  When  and  How  Paid 

Lime 

Date 

Vch 
No. 

Explanation 

For  Ck  and 
Cash  Pay't 

For  Sundry 
Payments 

• 

15 

25 

20 

19 

1 

1 

70 

25 

, 

Aug. 

2 

2- 

Bills  Pay 

265 

50 

90 

3 

3 

W.E.F.Dft. 

250 

16 

6 

70 

% 

75 

3 

4 

Mer.  Bank 

241 

15 

2 

25 

1 

35 

3 

5 

Mer.  Bank 

49 

95 

291 

10 

SI 

90 

6 

2 

60 

15 

81 

90 

25 

27 

45 

6 

70 

9 

2 

10 

291 

10 

806 

76 

148 


MANUFACTURING 


Vouchers  Payable  Dr."  column  on  the  credit  side  need  not  be  posted  as  the  controlling  account  is 
established  from  the  Voucher  Record  by  this  scheme  of  books. 

The  footing  of  the  "Net  Sales  Cr."  column  on  the  debit  side,  and  of  the  "Net  Cost  of  Material 
Dr."  column  on  the  credit  side  may  or  may  not  be  posted  as  the  teacher  may  prefer,  and  the  account 
used  as  a  summary  account  for  statistical  purposes. 

Ordinary  Cash  Book. — The  Cash  Book  for  this  business  may  be  kept  in  the  ordinary  way,  except 
that  the  credit  columns  are  used  respectively  for  sundry  items  and  for  "Vouchers  Paid."  The 
"Vouchers  Paid"  column  contains  the  items  of  the  cash  payment  column  of  the  Voucher  Record. 
The  total  of  these  columns  must  agree.     See  the  accompanying  form. 

CASH  BOOK 


Sundries 

Vouchers 
Paid 

19 
Aug 

1 

Balance 

47090 

19 
Aug 

1 

Real  Estate,    2  blocks  of 
land 

800 

Buildings,  Etc. 

1350 

Machinery,  Water  Wheel 

300 

- 



Miscellaneous  Machinery 

375 

For  placing  the  same,  etc. 

50 

Inventory  138 

Tools  as  per  Inv.  139 

35 
125 





June 

1 

Labor  per  pay-roll  19 

3 

Labor  per  pay-roll  20 

11 

5 

Labor  per  pay-roll  21 

89 

6 

VB 
1 

V  No.  4,  A.  B.  Dun  &  Co. 

241 
49 

15 

— 

7 

VR 

1 

V  No.  5,  Miller  &  Co. 

55 

95 

Discount 

5 

667.  Paying  Creditors  and  Getting  Receipts  or  Vouchers.— i  One  way  is  to  make  out 
the  voucher  and  the  check  on  the  same  paper.  This  form  requires  the  invoice  to  be  copied  on  the 
voucher;  or  at  least  an  abstract  of  the  invoice  to  be  made  on  the  voucher.  When  the  voucher-form 
is  receipted  and  the  check-form  indorsed,  the  check  becomes  payable  to  the  payee.  This  form  is 
illustrated  in  Vouchers  i,   2,  3. 

The  objections  to  this  method  are  the  extra  work  in  copying  the  invoice  or  an  abstract  of  it  on 
the  voucher  and  the  bulkiness  of  the  document.  It  is  also  objected  that  this  plan  unnecessarily  ex- 
poses the  business. 

2.  A  second  way  is  to  make  out  the  voucher  and  the  check  in  separate  documents  and  to  ask 
the  creditor  to  receipt  the  voucher  and  to  return  it.  To  insure  the  return  of  the  voucher,  it  is  usual 
to  print  at  the  bottom,  in  bold  type,  "Please  date,  receipt,  and  return  this  voucher  by  first  mail." 
This  form  is  shown  in  "Remittance  Voucher,"  illustration  4.  The  objection  urged  against  this  plan 
is  that  the  voucher  is  not  always  returned  promptly,  sometimes  requiring  several  letters  to  get  it 
returned,  thus  requiring  additional  work  and  stamp  expense.  In  some  instances  the  voucher  is  for- 
gotten by  both  the  payer  and  the  payee  and  not  returned  at  all,  and  the  record,  in  that  event,  is 
incomplete.  This  objection  is  almost  entirely,  if  not  completely  overcome  by  using  the  Remittance 
Voucher  and  the  Classification  Voucher  combined,  illustrations  4,  5,  and  6.  Carbon  may  be  used  to 
fill  in  classifications  on  inside  of  Classification  Voucher,  overcoming  the  objection  of  recopying.  More- 
over, the  business  is  not  exposed  because  the  classification  is  by  letter  or  number  or  both.  In  this 
plan  the  check  bears  the  same  number  as  the  voucher. 

3.  A  third  way  is  to  inclose  with  the  check  an  ordinary  receipt,  to  be  signed  by  the  payee  and 
returned. 

4.  A  fourth  way  is  to  use  a  Voucher  Check.  The  Voucher  Check  is  an  ordinary  check  with  a' 
statement  on  the  left-hand  end,  containing  an  itemized  list  of  the  articles  in  the  invoice,  and  for  which 
the  check  is  to  be  full  payment.  Following  the  list  of  the  articles,  there  is  a  printed  statement  that 
"No  receipt  is  required;  the  indorsement  of  this  check  is  acknowledgment  that  the  invoice  is  paid  in 


MANUFACTURING 


149 


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MANUFACTURING 


full."     See  illustration  No.  8.     Some  Voucher  Checks  have  no  list  of  articles,  but  contain  a  printed 
statement    on  the    face,  "In  full  payment  for  Voucher  No.  — ." 

668.  The  Cash  Book  Entry. — When  a  creditor  is  paid  by  any  of  these  methods  all  that  is 
necessary  is  to  enter  on  the  credit  side  of  the  Cash  Book  the  date,  in  the  date  column,  and  write 
the  "Voucher  No. — "and  the  "Check  No. — "  in  the  proper  explanation  columns.  It  is  not  necessary 
to  enter  the  name  of  the  creditor  paid,  as  the  number  of  the  voucher  answers  for  that. 

Special  Column  Sales  Book. — This  book  like  the  Special  Column  Cash  Book  is  divided  into 
columns  representing  the  various  accounts  with  manufactured  goods.  All  sales  may  be  entered  in 
this  book  or  only  sales  on  account  and  for  note,  as  the  teacher  may  prefer.  The  student  should 
add  the  items  of  the  sale  to  see  that  the  total  of  the  several  items  equals  the  "Amount  of  Sale."  When 
a  page  is  filled,  the  footings  of  the  several  columns  may  be  carried  to  the  next  page  until  the  end  of 
the  week  or  month,  or  the  totals  may  be  posted  at  the  close  of  each  page  as  the  teacher  may  prefer. 
One  line  should  be  left  at  the  bottom  of  the  page  below  the  footings  in  which  to  set  Ledger  folios,  as 
in  the  Cash  Book. 

669.  Ledger  Accounts. — Ledger  accounts  are  opened  with  the  various  materials  bought  for 
manufacturing  purposes,  as  indicated  by  the  headings  of  the  separate  columns  in  the  Voucher  Record. 

The  Ledger  accounts  for  the  sales  are  to  be  opened  in  accordance  with  the  various  classes  of 
goods,  as  represented  by  the  merchandise  cards,  which  are  as  follows :  Sole  Leather,  Harness  Leather, 
Sheep  Skins,  Kip  Skins,  Goat  Skins,  Calf  Skins,  Wool,  Glue  Scraps,  and  Hair. 

The  student  must  be  careful  to  note  that  most  accounts  opened  from  the  Voucher  Record  repre- 
sent raw  materials,  while  accounts  opened  from  the  Sales  Book  represent  accounts  with  manufactured 
goods.     The  two  must  not  be  confused. 

There  will  be  other  miscellaneous  accounts;  such  as,  Real  -Estate,  Machinery,  Manufacturing, 
Labor,  Tools,  etc.  No  accounts  are  to  be  kept  with  the  persons  or  firms  from  whom  you  buy  goods 
on  account,  the  accounts  being  represented  by  the  Voucher  Record. 

670.  Manufacturing  Account. — In  strictly  manufacturing,  a  merchandise  account  is  not 
kept,  but  instead,  an  account  is  opened  with  "Manufacturing,"  or  in  case  of  a  single  article,  an  account 
is  opened  with  the  article  manufactured,  or  a  trading  account  may  be  opened,  if  desired. 

The  Manufacturing  account  is  seldom,  if  ever,  used  except  at  the  end  of  the  year,  of  at  such 
time  as  the  books  are  closed,  at  which  time  all  accounts  with  manufactured  goods  and  with  materials 
used  in  manufacturing,  labor,  and  all  other  accounts  with  the  necessary  expenses  for  manufacturing,' 
such  as  Labor,  Expense,  Freight,  Express,  etc.,  are  closed  into  the  Manufacturing  account. 

If  improvements  are  made  or  extra  furniture  or  other  equipments  are  bought  for  the  office,  they 
should  be  charged  to  some  account  that  could  easily  be  distinguished  from  those  belonging  strictly  to 
the  cost  of  manufacturing;  such  as,  Special  Expense,  or  the  name  of  the  improvement  or  property 
would  answer  the  purpose.  These  accounts  with  Interest  and  Discount,  Collections,  and  all  other 
accounts  that  do  not  in  any  way  pertain  to  the  manufacturing  of  the  goods,  should  be  closed  directly 
to  the  Loss  and  Gain  account. 

The  actual  cost  of  the  goods  manufactured  is  ascertained  by  opening  separate  accounts  on  be- 
ginning business  with  such  articles  and  raw  materials  as  may  be  necessary  to  buy  for  manufacturing 
purposes. 

A  "Machinery  account"  should  be  kept  which  should  be  charged  with  all  machinery  bought. 


SPECIAL   COLUMN 


LP 

NAME 

ADDRESS 

TERMS 

AM'T 

SOLE  LEATHER 

HARNESS   LEATHER 

SHEEP  SKINS 

OP 
SALE 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

19 
kug. 

I 

G.  E.  Daley 

Boston,  Mass. 

Account 

472 

08 

1240  # 

22C 

272 

80 

I20# 

40C 

48 

OO 

I 

A.  B.  Cook 

Baltimore,  Md. 

Account 

965 

5° 

x35°# 

22C 

297 

00 

235°# 

28c 

658 

OO 

2 

Bills  Rec. 

Brooklyn,  N.Y. 

W.  S.  Wood's 
30-day  note 

97 

75 

MANUFACTURING 


151 


An  account  should  be  kept  with  "Tools"  in  like  manner.  An  account  should  be  opened  with  "Repairs" 
and  all  repairs  charged  to  it.     It  should  be  closed  into  Manufacturing  account. 

At  the  end  of  the  year,  an  inventory  is  taken,  when  an  approximate  value  is  placed  on  all  prop- 
erty belonging  to  these  accounts.  A  certain  per  cent  is  allowed  on  machinery,  tools,  etc.,  for  wear 
and  depreciation  in  value ;  that  is,  if  a  machine  is  estimated  to  give  service  for  ten  years,  a  discount 
of  ten  per  cent  from  the  original  cost  should  be  deducted  each  year  when  taking  the  inventory,  and  if 
estimated  to  wear  only  five  years,  a  twenty  per  cent  discount  from  the  original  cost  should  be  made,  etc. 

A  common  way  of  getting  at  a  fair  inventory  on  machinery,  tools,  etc.,  is  to  have  some  experi- 
enced person  to  test  the  machinery,  etc.,  and  thereby  to  reach  a  fair  value.  Appraisal  Companies  are 
established  in  all  large  cities.  These  Appraisal  Companies  have  men  that  are  experts  in  special  lines 
and  if  a  flour  mill  or  a  printing  office,  etc.,  is  to  be  inventoried,  a  specialist  in  the  line  required 
is  sent  to  make  the  appraisal. 

At  the  end  of  the  year  these  accounts  are  credited  with  their  respective  inventories,  and  then 
closed  directly  to  the  Manufacturing  account. 

Accounts  representing  raw  materials  are  closed  by  cr-diting  each  with  its  inventory  and  then 
closing  the  difference  into  Manufacturing  account. 

When  all  accounts  pertaining  to  manufacturing  have  been  closed  to  the  Manufacturing  account, 
it  will  show  the  gross  profit  or  loss  of  manufacturing.  If  the  total  expenditures  and  receipts  of  manu- 
facturing are  wanted,  it  will  be  necessary  to  transfer  the  debit  and  the  credit  footing  of  all  accounts 
pertaining  to  the  cost  of  manufacturing  to  the  "Manufacturing"  account.  This  should  be  done  in 
accordance  with  the  instructions  for  "Transferring  Ledger  accounts,"  par.  285.  The  debit  side  of 
the  Manufacturing  account  will  show  the  cost  of  all  goods  manufactured,  and  the  credit,  the  receipts. 
The  difference  between  the  two  sides  will  be  the  loss  or  gain,  which  should  be  closed  to  the  Loss  and 
Gain  account.  Or  to  Trading  Account,  if  desired  to  keep  a  Trading  Account.  When  this  work  has 
been  done,  the  books  aie  closed,  the  same  as  in  any  other  business. 

671.  Closing  the  Books. — Close  all  accounts  pertaining  to  the  cost  of  manufacturing  to  the 
Manufacturing  account.  Read  "Manufacturing  Account."  In  closing  the  accounts,  transfer  the 
footings  of  the  various  amounts,  and  not  the  balances. 

Close  all  other  amounts  to  the  Loss  and  Gain  account.  If  necessary  see  "Steps  in  Closing  Books," 
par.  413. 

672.  Applicability  of  the  Voucher  System. — If  the  learner  will  reflect  he  will  see  that  that  part 
of  the  Voucher  Record  from  the  left,  up  to  and  including  the  Sundries  column, 'is  in  reality  a  Purchase 
Register,  and  that  it  differs  from  other  Purchase  Registers  in  that  it  is  a  record  not  only  of  the  ma- 
terial bought  or  manufuctured,  but  that  it  also  contains  a  record,  in  classified  form,  of  machinery, 
tools,  labor,  and  every  outlay  necessary  to  carry  on  the  business,  and  that  the  Voucher  Record  takes 
the  place  of  accounts  with  creditors  furnishing  all  these  things,  he  will  realize  that  the  Voucher  System 
is  especially  applicable  to  a  business  that  has  numerous  classes  of  purchases,  because  the  method 
saves  entries  and  postings. 

Then,  if  he  will  reflect  that  that  part  of  the  Voucher  Record  under  "Explain  When  and  How 
Paid,"  is  a  record,  also  in  classified  form,  of  the  payments  to  the  sundry  creditors,  he  will  then  fully 
realize  what  a  great  time-saver  it  is. 

The  Voucher  System  is  extensively  used  by  factories,  railroads,  express  companies,  public  and 
private  corporations,  and  many  other  kinds  of  business. 

SALES     BOOK 


GOAT    SKINS 

KIP  SKINS 

CALF  SKINS 

WOOL 

HAIR 

— 1 

GLUE    SCRAPS 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

Quan. 

Price 

Amount 

45°# 

25C 

112 

5° 

3?7# 

I2^C 

38 

38 

80  4 

\o 

40 

30  bu 

35C 

IO 

5° 

6i4# 

I2^C 

76 

75 

60  bu 

35C 

21 

00 

152  MANUFACTURING 

VOUCHER  ILLUSTRATIONS 

The  following  invoice  represents  a  purchase,  on  account,  at  thirty  days. 

Cincinnati,  Ohio,  June  1, 


.19 


•vr    Boston  Tanning  Co 


130UGIIT  OF. 


American  Mdse   Co. 


Terms. 


dealers  in   GENERAL  MERCHANDISE 

30  days  net 


No.. 


140 


All  Claims  for  Shobtagb  or   Damage  mhst   bb  made  on  Receipt  of  Goods 


100 

Hides 

3   l-4c 

254 

31 

20 

brls.    Salt 
gals.    Fish  Oil 

75c 

25   l-2c 

15 
10 

20 

40 

50 

gals.    Prime   Fish  Oil 

30c 

15 
288 

40 

cds.    Tan  Bark 

7   20 

582 

51 

- 

Upon  receiving  the  above  invoice,  the  several  items  are  transferred  to  the  voucher,  as  shown  in  the 
following  form: 

As  separate  accounts  are  to  be  kept  with  the  various  materials  used  in  the  business,  the  items  of  the 
invoice  are  classified  and  combined  upon  the  voucher,  according  to  the  ledger  accounts  to  be  affected.  The 
several  amounts  are  then  entered  upon  the  Voucher  Record. 

Thus  the  two  items  of  oil  in  the  foregoing  invoice  are  united  on  the  voucher  into  one  charge  of  $25.20 

against  the  Oil  account. 

ILLUSTRATION  No.  i 

VOUCHER  CHECK 


Boston 


Tanning  Company 


Pay  to. 


American  Merchandise  Company, 


Address. 


Cincinnati,.   Ohio. 


rF  NOT  CORRECT 

.    RETURN   WITHOUT   ALTERATIONS   AND   STATE   ERROR. 

100 

Hides                                                            3-1/4? 

254 

31 

20 

brls.   Salt                                           75^ 

15 

40 

gals.   Fish  Oil                                    25-1/2? 

10 

20 

50 

M         Prime  Fish  Oil                     30? 

15 

25 

20 

40 

cds.     Tan  Bark                              7.20 

288 

582 

51 

EXAMINED     ANDyKSftHIlD      ON      VOUCHER 

APPROVED  VpR   PAYMENT  By 

™  NO.        1. 

AMT.  O 

P  CHUCK,  *    UO«J.  51 

■^                                   DISTRIBUTION   OF  OHAHOKS 

CASHIER'S   RECORD 

Hlfles 

254 
15 

JUL 
_20_ 

S*if 

nil 

25 

288 

Tan  Bark 

' 

1 

MANUFACTURING 


li 


The  following  form  illustrates  the  back  of  Voucher  No.  1  as  it  should  be  filled  out  before  sending  to 
the  payee.  When  the  proper  official  for  the  American  Mdse.  Co.  signs  the  receipt,  the  paying  bank  will 
honor  the  check.  One  advantage  of  the  Voucher  Check,  as  you  will  see  by  studying  the  form,  is  that  it  is 
not  transferable,  and  no  one  but  the  payee  named  in  the  check,  or  a  collecting  bank,  can  get  the  money.  No 
detailed  explanation  of  the  form  is  necessary,  as  it  is  self-explanatory. 


NO.. 


Boston.   Mans.,    .Tnnft  ?.?,, 


_190.iL 


Received  from. 


Boston 


Five  Hundred  Eighty-two  and   51/100 


.TANNING  COMPANY 

--_  $582.51 


BEING    IN   FULL   PAYMENT  OF   ACCOUNT   HEREIN.     Ck/\/\AJ  "'Y^L^-jULs' 


NOTICE  : 


THIS  RECEIPT  MUST  BE  SIGNED  ONLY  HY  THOSE  HA\JNG  SUCH  AUTHORITY  AND   IN  INK. 
PAYING  BANK   VVIL.L.    NOT    ACCEPT    UNLESS    CONDITIONS    ARE   COMPLIED    WITH, 


WHEN    PROPERLY    RECEIPTED    THIS    VOUCHER    IS 
PAYABLE    AT 

Merchants  Bank,  Boston,  Mass. 


THIS    VOUCHER    CHECK    IS    GOOD    ONLY    WHEN 
SIGNED    BY 

American  Merchandise  Company. 


05 

0 

W 

00 

K 

M 

W 

. 

H 

& 

>* 

0 

0 

hi 

< 

p 

fe 

tu 

B 

0 

111 

H 

BQ 

H 

« 

B 

fc 

H 

< 

P5 

Voucher  No.  2. — The  amounts  of  this  voucher  are  transferred  to  the  second  line  of  the  Voucher 
Record.  As  the  invoice  is  paid  by  a  note,  Bills  Payable  is  credited  in  the  "Journal  Column."  Proper 
entries  are  also  made  in  the  explanation  columns  for  payments,  at  the  right-hand  side  of  the  book.  As  the 
purchase  has  been  paid  by  note,  the  voucher  should  be  receipted  and  then  filed. 

VOUCHER  CHECK 


Boston 


.Tanning  Company 


Pay  to. 


American  Merchandise  Company, 


Address. 


Cincinnati,  Ohio. 


IP  NOT  CORRECT,  RETURN  WITHOUT  ALTERATIONS  AND  STATE  ERROR. 


m. 


120 


20 


.500 


Kip  Skins.  960# 


~4?" 


Sheep 


27^ 


cds.  Tan  Bark 


8.40 


brl.  Lime 


90$ 


Lime 


#   Tallow 


3Qi 


5£_ 


EXAMINED      ANB? 
RECORD   ■B.tJ^^- 


ERED      ON     VOUCHES 


APPHOVKftJ'OJJI  PAYMENT  Bl 

9h  tf?.  O^Zc^^^ 


DISTRIBUTION    OB"   OHAROE9 


Kip   Skins 

Sheep  " 

Tan  Bark 

_LAme 

Tallow 


90_ 


ao_ 


Cb  ioked_(L£- — 


52 
168 


4D_ 
40- 

7CL 


-25- 


38 

40 

32 

40 

168 

1 

70 

25 

265    50 


2. 


VOUCHER  NO,. 

amt.  op  check,  a26  5.  SO 


OASniER'9    RECORD 


154 


MANUFACTURING 


Voucher  No.  3. — The  amounts  of  this  voucher  will  be  found  properly  entered  on  the  third 
line  of  the  accompanying  Voucher  Record.  As  the  invoice  is  paid  for  by  a  draft  on  W.  E.  Fowler,  he  is 
credited  in  the  Journal  column.  The  proper  entries  are  also  made  in  the  explanation  columns  for 
payments,  at  the  right-hand  side  of  the  book.  This  voucher  should  also  be  receipted  in  due  form,  and 
permanently  filed. 


Boston 


VOUCHER  CHECK 


.Tanning  Company 


Pay  to. 


American  Merchandise  Company. 


Address. 


Cincinnati.   Ohio. 


EP   NOT  OOHREOT.   RETURN   WITHOUT  ALTERATIONS  AND   BTATE   ERROR. 


_3Ql 


_2Q_ 


.10_ 

AQl 


-20_ 


Hides.   2579# 


2-1/2^ 


15S6# 


2-1/4^ 


Kip  Skins,  120# 


2-5/49? 


Sheep 


227? 


cds,  Tan  Bark 


7.10 


brl.  Lime 


90^ 


EXAMINED      AMI) 
RECORD   BY 


EKED       ON      VOUCHER 


.  j  APPRaVE».Fm   PAYMENT  BY 


DISTRIBUTION    OP   CHARGES 


Hides 


Kip  Skins 


Sheep  w 


Tan  Bark 


Lime 


59 

48 

35 

68 

Retch.nkq/  axi> 

Bt         {~Z 

95 

16 

3 

50 

8 

60 

142 

t>n 

95   16 


3   !50 


8   30 


142 


90 


250 


16 


VOUCHER  NO.. 


3. 


AMT.   OF  CHECK, 


*  250.16 


CASHIER'S    RECORD 


ILLUSTRATION  No.  4 

BOSTON  TANNING  COMPANY 

26-28  Main  Street  East  BOSTON,  MASS. 

REMITTANCE  VOUCHER 


7b_ 


AMERICAN  MERCHANDISE  COMPANY 


Address. 


Date  of  Invoice 

DESCRIPTIVE  DETAILS 

AMOUNT 

CHARGE  TO 

19 

Invoice  as  Rendered, 

Aug. 

100  Hides                                                                              3  l-4c 

254 

31 

A 

20  Brls.    Salt                                                                                     75c 

15 

00 

H 

40  Gals.    Fish  Oil                                                                  25   l-2c 

10 

20 

K 

50  Gals.    Prime  Fish  Oil                                                             30c 

15 

00 

K 

40  Cd.    Tan  Bark                                                                             7.20 

288 

00 

F 

582 

51 

Correct 

^%S& 

Audited 

Approved  for        /?      * 

Payment      ^Jf-jsS^  <VZTreas. 

Voucher  No 


Received  payment  in  full  of  the  above lJ^^/j- 19 $    ^f&S ' 

Please  sign  and  return            l^4t^-^^^^//^^ 
/  ' 


MANUFACTURING 


155 


Classification  Voucher 


ILLUSTRATION  No.  5 

(This  illustrates  the  inside  of  No.  6) 


RECEIPTS  ATTACHED 

AMOUNT 

CHARGE  TO 

100    Hides                                                                       .               sic 

2  54 

31 

A 

20    Brls.  Salt                                                                               75c 

15 

OO 

H 

40    Gals.  Fish  Oil                                                                     25^0 

•     IO 

20 

K 

50    Gals.  Prime  Fish  Oil                                                           30c 

15 

OO 

K 

40    Cd.  Tan  Bark                                                                      7.20 

288 

OO 

F 

. 

> 

582 

51 

Correct 

E.J.  G. 

Audited 

W.  B.  P. 

Approved  for  Payment 

C.  C.                Treas. 

o 

u 

<D 
XI 
O 

o 


0 

u 

0 

z 

z 
z 
< 

r- 

z 
o 
h 
(/) 
o 
m 


ILLUSTRATION  No.  6 

(This  represents  the  outside  of  No.  5) 


43 

= 
a 

0 

B 

< 

O 
O 

O 
O 

0 

00 
00 
<N 

u-2 

00 

8 

0 
g 

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a 

2 

ft 

O 

w 

1—1 

M 

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*; 

£ 

0 

H 

O 
H 

0 

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/ 

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O 

O 

U2 
Q 

o 

Pi 

CJ 


O 


O 
1 — 1 

H 
< 
o 

I — I 

to 

1 — 1 

CO 
CO 

< 

o 


d 

§ 

s 
< 

1H 

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s 

§ 

0 

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s 
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1 

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156 


MANUFACTURING 


ILLUSTRATION  No.  7 

(This  represents  the  outside  or  cover  of  the  voucher.    The  inside  of  this  cover  is  blank) 


CHARGE 


19. 

Calf  Skins 

20. 

Goat  Skins 

21. 

Sheep  Pelts 

22. 

Tan  Bark 

23. 

Lime 

24. 

Salt 

25. 

Bate  Material 

26. 

Tallow 

27. 

Fish  Oil 

28. 

Caoutchouc 

29. 

Sulphuric  Acid 

30. 

Iron  Filings 

31. 

_       _,   ,,             f    Non  Productive 
Pay  Roll            [   Productive 

32. 

Depreciation 

32. 

SELLING  EXPENSE 
Salesmen's    Salaries  and  Expense 

33. 

Commissions 

34. 

Advertising 

35. 

Mdse  Dis. 

36. 

Cash  Dis. 

37. 

Returns  and  Rebates 

SUNDRIES 

Amount 

AMT 


288 

15 

25 

20 

582 

51 

BOSTON    TANNING    COMPANY 


Check  No.. 


Voucher  No. 


Charged   to  Acc'L 


190 _ 


Due  for  Discount 

Acc'tsPayah 

Less %  Di 

Contra  Acc't 
Check  for 

le$ 

s.  $ 

/ 

$ 

$ 

CHARGE 

AMT 

GENERAL  EXPENSE 

1.     Maintenance  of   R.   E.  and  Bldg. 

2.     Office  Fur.  and  Fix. 

3.     Books  and  Stationery 

4.     Printing 

5.     Insurance 

6.     Taxes 

8.     Executive  Salaries 

9.     Office  Supplies 

1 1 .      Postage 

12.     Telegrams 

13.     Telephones 

14.     Light 

15.      Fuel  or  Power 

16.      Freight,    Drayage,    Storage 

FACTORY  EXPENSE 

17.     Hides 

254 

31 

IS.     Kip  Skins 

Illustration  No.  5  shows  the  inside  of  illustration  No.  6.  The  two  make  up  the  Classification 
Voucher.  The  Classification  Voucher  is  never  sent  out,  but  is  retained  in  the  office.  The  Remittance 
Voucher,  Illustration  No.  4  (of  which  Illustration  No.  5  is  a  carbon  duplicate),  is  the  only  voucher 
that  leaves  the  office  under  the  plan  of  Classification  and  Remittance  Voucher.  Retaining  the 
Classification  Voucher,  it  will  be  seen,  preserves  all  the  data  of  the  transaction  whether  the  Remit- 
tance Voucher  is  returned  or  not.  The  Classification  Voucher  is  the  cover  for  all  related  documents, 
just  as  Illustration  No.  7  shows  the  cover  for  all  related  documents.  Both  provide  for  classifi- 
cation on  back  of  cover.  The  Voucher  Check,  illustration  8,  is  generally  used  with  illustration  7. 
An  ordinary  check  or  draft  is  sent  out  with  a  Remittance  Voucher. 

673-  The  Petty  Cash  Book. — The  Imprest  method  of  paying  petty  amounts  (explained  on 
pages  85  and  86)  is  especially  applicable  to  the  Voucher  System.      When  the  petty  cashier's  funds 


MANUFACTURING 


157 


run  low,  he  makes  out  a  Voucher  and  classifies 
his  payments  for  which  he  has  receipts  or  vou- 
chers, on  the  form  of  voucher  used  by  the  firm, 
submits  his  classified  voucher  to  the  head 
cashier,  and  gets  a  check  for  his  expenditures, 
which  check  added  to  what  he  has  left  on  hand 
brings  the  amount  up  to  the  original  allowance 
for  the  month. 

MODIFIED  VOUCHER  METHOD 

Many  business  houses  approach  the  Voucher 
Method  of  keeping  accounts  by  not  opening 
accounts  with  creditors. 

This  is  done  in  either  of  two  ways: 

i.  When  an  invoice  is  received,  the  book- 
keeper or  clerk  figures  the  discount  at  due  date, 
and  records  on  the  invoice  the  discount  and  the 
net  amount  of  cash  necessary  to  pay  the  invoice. 
The  invoice  is  then  filed  chronologically,  in  a 
Desk  Portfolio  file,  with  compartments  num- 
bered i  to  31,  allowing  enough  time  for  the 
check  to  reach  the  creditor  before  the  discount 
period  expires. 

Each  morning  the  bookkeeper  examines  the 
number  of  the  file  corresponding  to  the  num- 
ber of  the  day  of  the  month,  and  when  he 
comes  to  the  date  the  invoice  is  to  be  paid,  he 
writes  and  mails  the  check  in  payment. 

2.  The  other  way  is  to  record  the  invoice, 
its  due  date,  discount,  and  net  cash,  on  the  In- 
voice. Register  and  Tell  Tale  combined,  as 
explained  on  pages  42  and  43,  and  to  lay  the 
sheet  for  the  current  week  on  the  manager's 
desk,  each  Monday  morning,  or  biweekly  or 
monthly  as  the  manager  may  require. 

You  can  use  your  Daily  Reminder  as  a 
Desk  Portfolio. 

The  fact  that  checks  are  so  universally 
regarded  as  receipts,  makes  this  method  pref- 
erable, in  the  opinion  of  many  business  men, 
to  the  full  Voucher  Method. 

One  column  on  the  credit  side  of  the  Cash 
Book  should  be  used  to  record  purchases  of 
Mdse,  and  the  total  for  the  day,  week  or  month 
posted  to  the  debit  of  Mdse  account  in  the  Gen- 
eral Ledger. 

Both  the  full  Voucher  System  and  the 
Modified  Voucher  Method  are  in  high  favor  with 
many  business  men;  and,  therefore,  it  seems 
that  it  would  be  well  for  the  learner  to  have 
considerable  practise  in  each.  Such  practise 
would  better  prepare  the  graduate  to  meet  the 
growing  demand  for  these  methods  of  account 
keeping. 


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f  this  check  constitutes  a  satisfaction 
all  invoices  and  items  included  in  the 

receipt  is  required. 

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CORPORATIONS 


GENERAL  OBSERVATIONS 

Definition. — A  Corporation  is  an  artificial  person  created  by  law. 

Classification. — Corporations  are  broadly  divided  into  two  classes — Public  and  Private.  We  shall 
here  consider  Private  Corporations,  or  those  founded  by  private  individuals  and  for  the  general  purpose 
of  financial  gain. 

Corporations  Compared  with  Partnerships. — In  general,  a  corporation  differs  from  a  partnership 
in  the  following  particulars: 

1.  A  corporation  is  created  by  law,  while  a  partnership  is  created  by  mutual  agreement. 

2.  A  corporation  may  exist  only  for  the  purpose  especially  prescibed  by  law,  while  a  partnership 
may  be  formed  for  any  purpose  not  forbidden  by  law. 

3.  The  existence  of  a  corporation  is  continuous  during  the  period  for  which  it  is  formed  and  regard- 
less of  the  persons  who  comprise  it;  a  partnership,  on  the  other  hand,  may  be  dissolved  by  the  death  or 
withdrawal  of  any  member  of  the  partnership. 

4.  A  member,  or  stockholder,  of  a  corporation  may  transfer  his  interest  without  affecting  the  legal 
status  of  the  corporation;  if  a  partner  transfers  his  interest  in  the  partnership,  the  partnership  is  thereby 
dissolved. 

5.  The  powers  of  a  corporation  are  limited  to  those  conferred  by  its  charter,  while  a  partnership  has 
all  the  powers  of  the  persons  comprising  the  firm. 

6.  The  liabilities  of  the  stockholders  of  a  corporation  are  limited,  while,  in  general,  a  partner  is 
liable  for  all  the  debts  of  the  firm. 

1.  A  corporation  is  bound  only  by  the  contracts  authorized  by  its  board  of  directors;  a  partnership 
is  generally  bound  by  any  contract  made  in  the  firm  name  by  any  of  the  partners. 

Purpose. — In  most  States  private  corporations  may  be  organized  only  for  such  purposes  as  are  set 
forth  by  the  statutes  of  the  State  wherein  the  corporation  is  formed. 

General  Outline  for.  the  Organization  of  a  Corporation. — The  statutes  of  the  different  states 
vary  so  widely  that  it  is  well-nigh  impossible  to  make  the  directions  broad  enough  to  cover  all  the 
steps  in  all  the  states,  but  the  following  will  serve  as  a  general  guide  for  the  formation  of  a  corpo- 
ration in  most  of  the  states.  If  the  teacher  prefers  the  students  to  go  through  the  steps  of  organiz- 
ing a  corporation  rather  than  to  assume  the  organization,  the  following  is  a  general  outline  of  how 
to  proceed: 

i .  There  should  be  at  least  five  advanced  students,  four  besides  the  student  that  is  'to  conduct 
the  business.  Most  states  require  only  three  incorporators,  but  in  schoolwork'  it  is  better  to  have  not 
fewer  than  five. 

2.  The  capital  stock  should  be  from  $25,000  to  $50,000. 

3.  Fill  out  the  Articles  of  Incorporation,  in  duplicate,  or  triplicate  (or  as  many  as  the  law  may 
require),  and  have  your  signatures  on  each  paper  witnessed.  (Usually  signatures  are  acknowledged 
by  some  one  duly  authorized  to  take  acknowledgments,  but  in  this  case  you  may  have  your  signatures 
witnessed.)  After  the  articles  are  duly  executed,  deliver  them  to  your  teacher,  who  will  act  as  Secre- 
tary of  State,  or  other  officer.  See  that  your  articles  are  accompanied  with  the  necessary  filing  fee,  as 
required  in  your  state.  If  the  articles  are  correctly  made  out,  and  the  necessary  amount  of  money 
paid  in,  and  the  required  capital  stock  subscribed,  as  called  for  by  the  statutes  of  your  state,  the 
teacher  will  record  your  Articles  of  Incorporation,  and  place  his  filing  stamp  on  them.  You  are  then 
required  to  file  one  copy  with   your   county  recording  officer  (the  county  recorder  or  county  clerk, 

[158] 


CORPORATIONS  159 

or  whatever  officer  the  statutes  of  your  state  require) .  The  purpose  of  filing  these  articles  of  incorpora- 
tion with  both  the  Secretary  of  State  and  the  county  officer  is  to  give  public  notice  to  tax  boards  and 
to  future  creditors. 

4.  Having  your  preliminary  organization  completed,  you  now  call  a  meeting  of  all  stockholders, 
for  the  purpose  of  organization  and  for  adopting  by-laws,  electing  a  board  of  directors,  in  accordance 
with  your  by-laws,  and  for  the  purpose  of  transacting  any  other  business  that  may  be  needful  to  com- 
plete the  organization.  The  usual  parliamentary  procedure  is  observed  in  conducting  these  pre- 
liminary meetings  until  the  permanent  organization  is  arranged  for.  It  is  usual  to  name  Roberts' 
Rules  of  Order  or  Cushing's  Manual  to  govern  in  all  cases  of  dispute.  Adopt  by-laws,  and  elect  direc- 
tors at  this  preliminary  meeting  of  the  stockholders.  When  directors  are  elected  and  other  necessary 
business  transacted,  the  meeting  is  adjourned  to  meet  according  to  the  directions  set  out  in  the  by-laws. 

5.  The  minutes  of  stockholders'  meetings  should  be  kept  separate  and  apart  from  the  record  of 
directors'  meetings.  Make  a  copy  of  the  Articles  of  Incorporation  and  of  the  by-laws,  in  the  Minute 
Book.  Minutes  of  all  stockholders'  and  directors'  meetings,  and  also  all  meetings  of  executive  and 
other  committees  must  be  kept  in  the  Minute  Book. 

6.  As  soon  as  possible,  the  newly  elected  board  of  directors  should  meet  and  organize  by  electing 
a  permanent  President,  a  Vice-President,  a  Secretary,  and  a  Treasurer,  in  accordance  with  the  by- 
laws, and  the  statutes  of  your  state.  The  board  of  directors  is  the  governing  body  of  a  corporation; 
and  generally  the  stockholders  have  little  to  say  as  to  how  the  business  shall  be  conducted.  In  some 
states,  however,  a  majority  of  the  stockholders  may  dismiss  the  directors  for  cause. 

The  President  is  the  executive  officer,  the  Secretary  has  charge  of  the  corporate  records  and  the 
seal.  The  Treasurer  is  custodian  of  and  has  charge  of  all  money  and  valuable  papers  belonging  to 
the  company.  The  officers  issue  stock  certificates.  The  directors  elect  a  general  manager  or  other 
subordinate  officers  to  perform  various  duties  in  connection  with  the  conduct  of  the  business.  The 
officers  act  under  the  general  direction  of  the  board  of  directors.  The  general  manager  usually  selects 
the  bookkeeper. 

7.  Having  properly  attended  to  all  these  preliminary  matters,  the  company  is  ready  to  open  the 
corporate  and  the  account  books  as  soon  as  the  statutes  permit.  The  Treasurer  should  deposit  the 
company's  money  in  bank  to  be  paid  out  as  the  by-laws  may  direct. 

Articles  of  Incorporation. — The  instrument  by  which  a  private  corporation  is  formed  is  called 
"Articles  of  Incorporation."  These  are  agreed  upon  by  the  persons  forming  the  corporation,  and  in 
most  of  the  States  the  following  essentials  are  required  to  be  set  forth: 

1.  Name  of  corporation. 

2.  Purpose  for  which  it  is  formed. 

3.  Place  in  which  business  is  to  be  done. 

4.  The  time  during  which  the  corporation  is  to  exist. 

5.  Amount  of  capital  stock. 

6.  Amount  of  stock  actually  subscribed,  and  by  whom. 

1.  The  number  of  shares  into  which  the  stock  is  to  be  divided. 

8.  The  amount  of  paid-up  cap'^al.  The  law  requires  that  this  must  be  a  certain  amount,  or  a 
certain  per  cent  of  all  the  capital  stock.     In  some  States  additional  facts  are  required  to  be  set  forth. 

The  Charter. — In  most  States,  the  statute  permitting  the  organization,  and  the  Articles  of  Incor- 
poration effecting  the  organization,  taken  together,  constitute  the  corporation's  charter.  These  confer 
and  define  the  company's  rights  and  powers.  In  a  few  States,  however,  the  Charter  is  a  formal  document 
issued  by  a  State  officer  certifying  the  organization  of  the  corporation,  and  usually  mentioning  its  name, 
powers,  purposes  and  duration. 

Powers  of  Corporations. — Among  these  are 

1.  The  right  of  the  corporation  to  exist  for  the  period  prescribed  in  its  charter. 

2.  To  sue  and  be  sued  in  the  corporation  name  the  same  as  a  natural  person. 

3.  To  purchase  such  lands  or  chattels  as  may  be  necessary  for  carrying  on  the  business  of  the  cor- 
poration; also  the  right  to  mortgage  such  lands  or  other  property. 

4.  To  possess  a  common  seal  to  be  used  in  the  execution  of  the  corporation  documents. 

5.  To  adopt' a  code  of  by-laws  not  inconsistent  with  the  charter  of  the  corporation,  or  with  the  con- 
stitution and  laws  of  the  State  in  which  the  corporation  is  formed. 


160  CORPORATIONS 

Duties  of  Corporations.  —  The  general  duties  of  corporations  are  prescribed  by  the  laws  of  the 
several  States.  Corporations  are  usually  required  to  provide  for  the  annual  election  of  their  directors  upon 
a  specified  date,  also  to  give  notice  to  the  stockholders  of  the  time  and  place  of  holding  such  election. 
The  elections  are  usually  required  to  be  by  ballot,  and  each  stoc  holder  has  the  right  to  vote  in  person  or 
by  proxy,  being  allowed  one  vote  for  each  share  of  slock  standing  in  his  name  as  shown  by  the  books  of 
the  corporation.  In  the  election  of  officers,  the  person  voted  for  who  receives  the  largest  number  of  votes  is 
declared  elected. 

Corporations  are  also  required  to  keep  a  record  of  their  legal  acts  in  books  of  record  provided  fcr  the 
purpose.  All  books  of  record  of  the  corporation  are  required  to  be  open  to  the  inspection  of  the  stockholders 
of  the  corporation.     In  some  states  this  right  is  abridged  by  statute. 

Liabilities  of  a  Corporation. —  Like  persons,  corporations  are  liable  for  the  acts  of  their  agents  or 
officers  when  acting  within  the  scope  of  their  authority.  Corporations  are  liable  for  trespass  committed 
by  .their  agents  or  officers  if  these  are  acting  in  the  name  of  the  corporation  and  within  the  scope  of 
their  authority.  Corporations  are  also  liable  for  taxes  upon  property  owned  by  them,  also  to  individual 
stockholders  for  any  infringement  of  their  rights  occasioned  by  the  acts  of  the  corporation  officers  or 
agents. 

The  individual  liability  of  stockholders  for  the  debts  of  the  corporation  varies  in  the  different  States. 
In  some,  this  liability  extends  to  the  amount  of  stock  held;  in  others,  to  the  amount  unpaid  on  the 
stock  held. 

The  general  liabilities  of  corporations  are  subject  to  much  variation  by  the  laws  of  the  different  States. 

Dissolution. —  A  corporation  may  be  dissolved 

1.  By  the  surrender  of  its  charter  and  its  acceptance  by  the  State  authorities. 

2.  By  forfeiture  of  its  charter  either  through  violation  of  its  terms  or  through  failure  to  use  its 
privileges  at  all. 

Upon  the  dissolution  of  an  insolvent  corporation,  the  property  belonging  to  it  is  placed  in  the  hands 
of  a  person  appointed  by  the  courts;  called  a  receiver,  who  closes  up  the  affairs  of  the  corporation ,  sells  the 
property,  pays  the  debts  of  the  corporation,  and  divides  the  assets,  if  any  remain,  among  the  stockholders. 

LEGAL  AND  OTHER  TERMS  USED  IN  CORPORATION  BUSINESS 

Charter. — This  is  the  written  instrument  or  instruments  authorizing  a  corporation  to  exercise  certain 
specified  privileges,  rights,  or  powers.     It  is  a  written  evidence  of  the  lawful  possession  of  a  franchise. 

Franchise.— This  is  a  right,  or  privilege,  granted  to  individuals  or  to  a  corporation  by  a  govern- 
ment, a  State,  or  a  public  corporation,  as  a  town,  city,  or  county,  which  right,  or  privilege,  cannot  be 
exercised  without  the  authority  of  the  grantor.  The  right  of  a  corporation  to  exist,  is  a  franchise;  the 
powers  and  privileges  granted  to  a  corporation,  are  a  franchise  belonging  to  the  corporation  itself.  A 
franchise  is  not  a  written  document,  but  simply  the  legal  right  itself. 

Stock  Certificates,  or  Certificates  of  Stock. — This  is  a  paper  usually  signed  by  the  president  and 
secretary  of  the  corporation,  and  issued  to  each  stockholder,  in  his  own  name,  and  certifying  to  his  title 
to  a  certain  number  of  shares  in  the  capital  stock  of  the  company,  and  the  par,  or  face  value  of  each 
share.  These  certificates  are  not  security  for  money,  neither  are  they  negotiable  in  the  strict  sense  of 
the  term,  although  they  may  be  bought  and  sold  like  other  property.  Transfer  of  title  may  be  effected 
by  endorsement,  or  by  a  formal  written  "Transfer  of  Stock;"  the  transfer  must  be  entered  on  the  books 
of  the  company  to  be  binding  upon  the  company,  although  it  may  be  good  as  between  the  vendor  and 
the  vendee  without  such  entry. 

Choice  of  Stock. — The  preferences  accorded  to  preferred  stock  are  based  upon  'contract  be- 
tween the  stockholders  and  the  corporation.  The  terms  of  the  contract  are  usually  printed  upon  the 
certificates  of  the  preferred  shares.  These  terms  vary  greatly  in  different  corporations.  Sometimes 
preferred  shares  are  made  "fully  participating."  That  is,  after  payment  of  a  certain  per  cent  of  divi- 
dends upon  them,  they  are  entitled  to  share  with  the  common  stock,  without  distinction,  in  all  remain- 
ing declared  net  profits.  Again,  we  find  preferred  shares  made  "non-participating;"  that  is,  after 
payment  of  a  fixed  per  cent  upon  them  at  the  dividend  periods,  they  receive  nothing  more,  no  matter 
how  great  the  profits  of  the  concern.  Thus,  it  sometimes  happens  that  a  company's  preferred  stock 
will  be  receiving  only  6%  per  annum,  while  its  common  stock  will  be  receiving,  perhaps,  25%  per 
annum.  In  that  event,  the  common  stock  will,  of  course,  .be  of  greater  value  than  the  preferred.  In 
general,  however,  the  preferred  stock  is  the  more  valuable. — Burritt  Hamilton,  in  Practical  Law 
>-3blished  by  Ellis  Pub.  Co. 


CORPORATIONS  161 

Common  Stock. — This  is  stock  that  is  represented  by  the  ordinary  certificates  issued  to  stock- 
holders, and  is  subject  to  all  the  conditions  of  the  company's  by-laws. 

Preferred  Stock,  Preferred  Shares,  and  Preference  Shares. — This  is  special  stock  issued  by 
corporations.  It  is  usually  issued  for  the  purpose  of  attracting  capital.  Preferred  stock  is  entitled  to 
an  annual  dividend  of  a, certain  per  cent  of  the  net  earnings,  before  a  dividend  can  be  paid  on  the  com- 
mon stock. 

Some  companies,  on  organization,  issue  different  classes  of  stock  for  the  purpose  of  effecting 
immediate  sale  of  a  certain  portion  of  the  stock,  thus  enabling  them  to  begin  operations  at  once;  and 
their  object  in  issuing  preferred  stock  is  to  attract  investment. 

Sometimes  a  crisis  is  reached  in  the  company's  affairs,  and  the  old  stockholders  are  unwilling  to  risk 
more  money  in  the  enterprise,  although  they  may  be  willing  to  encourage  others  to  do  so  by  giving  them 
a  preference  in  the  profits,  which  the  increased  capital  may  enable  the  concern  to  gain.  A  class  of  pre- 
ferred stock  is  sometimes  credited  to  meet  this  condition. 

Corporations  are  not  allowed  to  pay  dividends  from  the  sale  of  capital  stock.  A  holder  of  preferred 
stock  is  not  a  creditor  of  the  company,  but  is  simply  a  stockholder,  and  his  only  advantage  is  a  right  to 
the  first  dividends  that  may  be  declared  from  profits  actually  earned.  In  case  these  are  not  sufficient  to 
meet  the  specified  rate  of  the  dividend  on  the  preferred  stock,  the  loss  falls  upon  the  holder,  and  he  has  no 
right  or  claim  to  be  reimbursed  from  the  future  earnings  of  the  company,    unless  his  shares  are  cumulative. 

Guaranteed  Stock.  —This  is  a  class  of  stock,  the  holders  of  which  are  entitled  to  a  Cumulative 
Preference  Dividend;  that  is,  the  holders  are  entitled  to  have  the  shortage  of  the  dividends,  if  any  occurs, 
made  up  to  them  from  the  future  profits  before  other  dividends  can  be  declared  on  common  stock.  Stock 
having  this  advantage  is  also  called  Cumulative  Preference  Stock,  as  it  has  a  guaranteed  annual  dividend 
which  must  be  paid  before  any  excess  of  net  earnings  can  be  used  for  any  other  purpose. 

Deferred  Stock. — Deferred  Stock  is  that  upon  which  interest  or  dividends  may  not  be  paid  until 
the  ordinary  stockholder  has  received  a  specified  dividend  per  annum.  Obligations  of  this  kind  resemble 
perpetual  loans  upon  which  interest  may  be  indefinitely  postponed.  Sometimes  the  holder  of  such  stock 
is  entitled  to  a  gradually  increasing  rate  of  interest  up  to  a  specified  rate,  and  when  this  is  reached,  the 
obligations  take  their  place  as  actual  stock.  In  stock  of  this  class,  the  owners  do  not  have  the  rights  of 
the  ordinary  stockholders,  and  may  take  no  part  in  conducting  the  affairs  of  the  concern. 

Non=Assessable  Stock. — This  stock  is  exempt  from  assessment.  It  may  be  of  any  of  the  previous 
kinds,  and  is  issued  under  a  contract  that,  regardless  of  the  financial  needs  of  the  corporation,  no  assess- 
ments are  to  be  levied  upon  it. 

Treasury  Stock  is  authorized  Capital  Stock,  either  original  or  reacquired,  that  has  been  placed  in 
the  Treasury  to  be  sold  as  directed  or  authorized  by  the  Board  of  Managers. 

Watered  Stock. — This  is  an  issue  of  stock  for  which  full  cash  value  has  not  been  paid.  Such  shares 
are  sometimes  issued  for  the  purpose  of  keeping  the  per  cent,  of  dividends  below  a  certain  rate.  In  some 
States  and  under  some  circumstances,  dividends  in  excess  of  a  certain  rate  are  prohibited.  By  artificially 
increasing  the  capital  stock,  the  percentage  may  be  lowered,  and  through  this  evasion  of  the  law,  the 
stockholders  may  get  the  same  amount  in  dividends  that  they  would  receive  were  the  entire  profits 
divided  upon  the  basis  of  the  original  stock. 

Capital  Stock. — This  is  the  capital  of  the  corporation,  and  is  represented  by  all  of  the  stock  sub- 
scribed. For  convenience,  it  is  divided  into  an  equal  number  of  shares,  usually  of  twenty-five,  fifty,  or 
one  hundred  dollars  each,  which  shares  are  owned  by  individuals  called  stockholders.  The  "Authorized 
Capital  Stock "  is  the  whole  or  nominal  capital  stock  permitted  to  the  corporation  and  may  be  much 
more  than  the  amount  of  actual  property  owned  by  the  corporation. 

The  funds  of  a  corporation  may  fluctuate ;  that  is,  they  may  be  increased  by  surplus  profits  or  dimin- 
ished by  losses  ;  but  the  Capital  Stock  remains  the  same  until  changed  in  accordance  with  legislative 
authority.  Shares  of  Capital  Stock  are  usually  represented  by  certificates.  These  shares  may  be  bought, 
sold,  and  taxed  like  other  property.  The  Capital  Stock  of  a  corporation  may  be  taxed  as  a  whole,  and  the 
individuals  may  also  be  taxed  for  the  shares  held  by  them.  Although  the  shares  represent  a  certain  part 
of  the  Capital  Stock,  a  holder  has  no  right  to  the  property  of  the  corporation  until  the  latter  is  dissolved.  The 
only  right  conferred  upon  the  holders  of  the  shares  is  the  right  to  their  proportion  of  dividends  and  profits, 
and  to  participate  in  the  making  of  by-laws,  the  election  of  officers,  and  the  alteration  of  the  corporate  charter. 

Unpaid  stock  is  as  much  a  part  of  the  assets  of  the  corporation  as  is  any  other  kind  of  property.  The 
directors  of  the  association  are  regarded  as  trustees  of  the  Capital  Stock,  as  represented  by  the  corporation  prop- 
erty, although  they  have  no  control  over  the  shares  which  represent  it,  except  those  which  are  still  unsold. 


162  CORPORATIONS 

Working,  or  Operating  Capital. —  This  is  a  specified  amount  of  property,  or  unsold  stock,  which  is 
set  aside  from  the  paid-up  capital,  or  sum  invested  in  the  plant.  Sometimes  corporations,  on  organizing, 
place  all  the  unsold  stock  to  the  credit  of  Working  Capital  for  the  purpose  of  selling,  or  otherwise  disposing 
of  this,  when  it  is  necessary  to  do  so  for  operating  purposes.  Corporations  may  be  short  of  necessary 
funds  for  carrying  on  the  business  after  all  the  stock  has  been  sold  and  paid  for ;  to  avoid  assessments  in 
such  cases,  the  stockholders  sometimes  return  a  certain  percentage  of  their  stock  to  the  company,  which 
is  set  aside  for  a  working  capital,  and  is  sold,  to  raise  the  required  funds  to  conduct  the  business. 

Plant. — This  term  applies  to  the  entire  outfit,  buildings,  land,  machinery,  tools,  fixtures,  etc.,  required 
for  operating  the  business. 

A  Stockholder  is  the  owner  of  one  or  more  shares  of  Capital  Stock,  his  ownership  of  these  shares 
constituting  him  a  member  of  the  corporation,  and  entitling  him  to  as  many  votes  in  the  election  of  officers, 
or  in  determining  corporation  affairs,  as  he  may  have  shares  standing  to  his  credit  on  the  corporation 
books.  The  subscribers  to  the  stock  of  a  corporation  become  liable  as  separate  debtors  to  the  company  for 
the  par  value  of  the  stock  subscribed,  and  this  liability  may  be  enforced  by  suit. 

The  issue  of  stock  certificates  is  not  necessary  to  perfect  a  subscription  ;  all  that  is  necessary  is  that  the 
subscriber  shall  have  bound  himself  by  subscription  or  otherwise,  to  become  a  contributor  to  the  funds 
which  the  Capital  Stock  represents.  The  possession  of  a  share  of  Capital  Stock  gives  the  holder  the  legal 
right  to  partake  of -the  surplus  profits,  and  also  imposes  upon  him  the  duty  of  paying  legal  assessments 
until  his  stock  becomes  fully  paid. 

Voting  by  Stockholders. — In  stockholders'  meetings  each  stockholder  is  allowed  to  cast  one 
vote  for  each  share  of  stock  he  owns;  that  is,  if  Jones  owns  ten  shares  of  stock  he  is  allowed  to  cast 
ten  votes   on  any  question  for  stockholders  to  determine. 

Cumulative  Voting. — In  some  states  cumulative  voting  is  allowed  by  stockholders;  that  is, 
if  five  directors  are  to  be  elected,  Jones,  a  stockholder,  who  holds  ten  shares  may  elect  to  cast  his  ten 
votes  five  times  for  one  director,  instead  of  casting  his  ten  votes  once  for  each  of  the  five  directors. 
This  power,  it  will  be  seen,  will  often  enable  a  minority  stockholder  to  elect  one  director  favorable 
to  him  and  thus  protect  his  interests. 

Voting  by  Proxy. — In  most  states,  a  stockholder  may  vote  in  person  or  by  proxy,  that  is  to 
say,  he  may  authorize  some  one  else  to  vote  in  his  stead,  by  giving  such  person  written  authority  to 
cast  his  vote. 

Quorum  to  Transact  Business. — The  by-laws  generally  specify  the  number  of  stockholders 
or  the  number  of  shares  to  be  voted  to  constitute  the  legal  quorum,  that  is,  the  required  number  of 
stockholders  or  number  of  shares  of  stock,  necessary  to  transact  business. 

Voting  by  Directors. — Directors  vote  as  individuals,  each  director  being  entitled  to  one  vote. 
The  fact  that  some  of  the  directors  may  be  officers  does  not  give  them  any  voting  power,  as  such. 
A  quorum  in  directors'  meetings  is  generally  a  majority,  the  number  of  shares  a  director  may  own 
having  nothing  to  do  with  his  voting  power. 

Gross  Earnings. —  These  are  the  total  receipts  in  money  or  property  that  are  actually  earned  by  the 
com  pan y. 

Net  Earnings. —  These  are  the  net  profits  that  remain  after  deducting  all  actual  expenses  from  the 
gross  earnings. 

Dividend. — This  is  a  specified  portion  of  the  profits  set  aside  by  the  directors  of  a  corporation  to  be 
divided  pro  rata  among  the  stockholders.  This  term  is  also  applied  to  the  sum  which  any  stockholder  may 
receive  as  the  result  of  such  division,  and  also  to  the  rate  per  cent,  that  the  whole  dividend  is  of  the  entire 
capital  stock  ;  thus,  we  speak  of  a  "Dividend  of  5%,"  meaning  that  the  sum  set  aside  for  the  dividend  is 
equal  to  b%  of  the  entire  Capital  Stock  which  is  paid  up,  also  that  each  stockholder's  share  of  this  dividend 
is  5%  of  the  par  value  of  all  paid-up  shares  owned  by  him. 

A  dividend  may  be  based  upon  the  rate  per  cent,  that  the  whole  dividend  is  of  the  paid-up  capital 
instead  of  the  capital  stock;  thus,  in  the  case  of  a  capital  stock  of  $80,000  with  $20,000  paid  up,  a  dividend 
of  8%  on  the  paid-up  capital  would  be  equal  to  only  2%  on  the  capital  stock. 

The  rate  of  dividend  may  be  based  upon  the  paid-up  capital  stock  instead  of  upon  the  entire  amount 
of  capital  stock;  thus,  if  the  capital  stock  were  $80,000,  of  which  $20,000  were  paid  up,  instead  of  declar- 
ing a  dividend  of  2%  on  the  $80,000,  a  dividend  of  8%  would  be  declared  on  the  $20,000.  P^ach  stock- 
holder  would  in  this  case  receive  dividends  in  proportion  tc  the  amount  of  his  stock  paid  up  instead  of  the 
amount  held. 

It  must  be  understood  that  a  dividend  cannot  be  legally  declared  when  such  dividend  would  im- 
pair the  capital  stock. 


CORPORATIONS  163 

Preferred  Dividend. —  This  is  a  dividend  payable  to  the  holder  of  preferred  stock.  See  "Preferred 
Stock." 

Stock  Dividend. —  This  is  a  dividend  issued  in  the  form  of  additional  stock,  instead  of  in  cash. 
A  corporation  may  have  made  large  gains  in  its  business,  but  these  gains,  instead  of  appearing  as  cash, 
may  be  in  the  form  of  increased  value,  in  the  merchandise,  plant,  or  other  company  property.  In.  order  to 
make  this  additional  value  available  for  a  dividend,  some  of  the  property  of  the  company  must  be  sold  for 
casn,  or  else  its  value  may  be  distributed  among  the  stockholders  in  the  form  of  increased  stock.  Issuing  a 
Stock  Dividend  is  a  convenient  way  of  accomplishing  this. 

To  Declare  a  Dividend. —  This  is  an  announcement  by  the  officers  of  the  company  of  their  readiness 
to  pay  a  specified  dividend  to  the  stockholders.  A  dividend  is  not  a  corporation  debt  until  it  has  been  duly 
declared  by  the  directors  of  the  company. 

Declaring  Dividends. —  In  general,  the  declaration  of  dividends  rests  with  the  discretion  of  the 
directors  of  the  company.  Usually  the  interests  of  the  corporation  are  best  served  by  making  uniform 
and  regular  dividends,  according  to  the  legitimate  profits  of  the  business.  Declaring  dividends  may  be 
indefinitely  postponed  ;  and  unless  it  appears  that  a  postponement  works  to  the  injury  of  the  complainants, 
a  court  of  equity  will  not  ordinarily  interfere. 

As  a  rule,  the  following  financial  points  should  be  carefully  considered  before  a  dividend  is  decided 
upon. 

A  dividend  should  be  declared  upon  actual  profits,  excepting  under  special  circumstances,  as  in  the 
case  of  the  existence  of  a  surplus  fund,  when  the  directors  may  be  justified  in  doing  otherwise. 

The  amount  of  available  assets  should  be  considered,  the  amount  of  present  liabilities  that  must  be 
discharged,  contemplated  repairs  and  necessary  improvements  to  be  provided  for,  actual  amount  of  cash  on 
hand,  etc. 

After  having  investigated  the  company's  operations,  the  secretary,  for  example,  may  be  able  to  inform 
the  directors  that  the  net  profits  of  the  business  appear  to  be  three  thousand  two  hundred  dollars,  which  is 
equal  to  8%  of  the  paid-up  capital  of  forty  thousand  dollars,  thus  enabling  the  trustees  to  declare  a  divi- 
dend of  5%,  and  place  the  remainder  of  the  gains  in  the  surplus  funds  for  the  purpose  of  defense 
against  future  financial  reverses,  unforeseen  contingencies,  bad  debts,  etc.  It  may  happen  in  closing  the 
books  that  a  net  gain  is  exhibited,  and  yet  no  cash  on  hand  with  which  to  pay  the  dividends.  In  this 
case,  the  company  may  be  justified  in  borrowing  money  with  which  to  declare  a  dividend. 

Dividend  Certificate. —  This  is  a  certificate  setting  forth  that  the  holder  is  entitled  to  a  dividend  of  a 
specified  amount  which  has  been  declared,  but  which,  for  some  reason,  it  is  not  feasible  to  pay  in  cash.  A 
Dividend  Certificate  may  or  may  not  bear  interest.  It  is  transferred  the  same  as  stock,  and  is  sometimes 
convertible  into  capital  stock.  Dividend  Certificates  are  liable  to  assessment  in  case  the  profits  are  not 
sufficient  to  meet  the  company's  liabilities  or  expenses. 

To  Pass  a  Dividend. —  This  is  a  failure  to  declare  a  dividend  at  the  time  when  such  dividend  is 
usually  made. 

Fictitious  Dividend. —  This  is  an  illegitimate  dividend  that  is  paid  from  the  capital  of  the  company 
in  the  absence  of  a  profit  or  a  surplus  fund,  from  which  a  legitimate  dividend  can  be  declared.  In  order 
to  declare  such  dividends,  a  false  showing  of  profits  is  often  made  by  arbitrarily  raising  the  inventory  on 
the  real  estate,  plant,  merchandise,  or  other  property  of  the  company.  The  purpose  of  such  forced  dividend 
is  usually  to  deceive  the  public  by  making  it  appear  that  the  company  is  more  prosperous  than  it  really  is, 
and  thereby  increasing  the  market  value  of  the  shares.  Its  benefit  to  the  stockholders  consists  in  enabling 
them  to  sell  their  stock  for  more  than  it  is  really  worth. 

Surplus  Fund. —  This  is  an  excess  of  the  net  profits  that  may  remain  after  the  interest,  dividends, 
expenses,  etc.,  have  been  paid.  This  fund  may  be  set  aside  for  the  purpose  of  meeting  unforeseen  expendi- 
tures, such  as  enlargement  of  the  plant,  repair  of  buddings  and  machinery,  etc.,  or  it  may  be  used  in  the  case 
of  sudden  losses,  or  in  the  event  of  an  unprosperous  season,  or  for  the  purpose  of  keeping  up  the  average 
per  cent,  of  the  dividends.  Surplus  funds  may  be  large  or  small,  according  to  the  profits  of  the  business, 
and,  of  course,  may  be  increased  or  diminished  by  varying  the  percentage  declared.  See  Account,  pnge  160 

Reserve,  or  Contingent  Fund. —  This  is  the  same  as  a  surplus  fund,  excepting  that  it  is  set  aside, 
or  reserved,  from  the  net  profits  of  the  business  before  the  declaration  of  a  dividend. 

Sinking  Fund. —  This  is  a  fund  set  aside  from  the  net  proceeds  of  the  business  for  the  purpose  of 
paying  an  existing  obligation,  due  at  some  future  date,  a  sufficient  sum  being  put  into  the  sinking  fund  each 
year  to  make  a  total  fund  equal  to  the  indebtedness  at  maturity. 

Rest  Account. —  This  account  is  practically  thejjame  as  a  surplus-fund  account,  excepting  that  the 


164  CORPORATIONS 

funds  credited  to  it  are  to  be  used  expressly  for  the  purpose  of  protecting  the  corporation  against  losses, 
Teverses,  or  other  contingencies  that  may  arise  in  the  business. 

An  Assessment  is  a  tax  levied  upon  each  individual  stockholder  in  proportion  to  the  amount  of  his 
stock.  It  is  levied  by  the  directors  of  the  company  for  certain  legitimate  purposes,  such  as  the  payment 
of  expenses,  discharge  of  liabilities,  etc.  It  is  levied  as  a  certain  per  cent,  upon  the  par  value  of  the  capital 
stock. 

An  Installment  is  a  part  payment  upon  capital  itock  for  which  a  stockholder  has  subscribed.  Stock 
may  be  issued  on  condition  that  the  installments  of  a  certain  fixed  percentage  of  the  par  value  of  the  stock 
are  to  be  paid  at  specified  periods,  or  they  may  be  paid  on  demand,  or  at  the  discretion  of  the  directors  of 
the  company,  according  as  the  business  may  develop  and  more  capital  be  required  for  operating  purposes. 
The  obligation  of  a  stockholder  to  pay  for  stock  subscriptions  is,  like  any  other  debt,  subject  to  the  statute 
of  limitations.  The  stock  is  often  sold  to  the  subscriber  on  condition  that,  in  default  of  payment  of  any 
required  installment,  the  company  may  take  up  the  stock  and  sell  it  at  public  auction,  keeping  the  amount 
already  paid  in  by  way  of  forfeiture.  Or  the  defaulted  installment  may  be  raised  by  the  company  selling  as 
many  shares  of  stock  belonging  to  the  delinquent  stockholder,  as  may  be  necessary  to  meet  the  unpaid 
installment,  and  the  cost  of  advertising  and  selling. 

The  rights  of  the  company  as  to  the  collection  of  delinquent  installments  are  usually  regulated  by  the 
laws  of  the  State  in  which  the  corporation  is  formed. 

When  by  agreement,  installments  are  to  be  paid  at  regularly  specified  intervals,  no  formal  notice  to  the 
stockholders  is  necessary.  When  stockholders  pay  their  installments,  they  receive  a  simple  receipt  for  the 
same,  signed  by  the  president  and  secretary,  or  instead,  they  may  receive  regular  installment  scrip.  But,  in 
either  case,  legal  certificates  of  stock  are  not  issued  until  the  purchase  price  of  the  stock  has  been 
paid  in.  Sometimes,  however,  certificates  of  stock  are  issued  with  the  first  installment,  the  certificates 
stating  the  rate  per  cent. ,  and  amount  of  stock  that  has  been  paid  in.  As  additional  installments  are  paid, 
the  old  certificates  are  surrendered,  and  new  ones  are  issued  in  their  place. 

Installment  Scrip. —  This  consists  of  certificates  issued  to  the  stockholders  for  installments  paid. 
After  all  the  stock  is  paid  up,  these  certificates  are  ultimately  returned  to  the  company  and  exchanged 
for  a  full  certificate  of  stock.     Installment  scrip  is  transferable  the  same  as  stock. 

Par  Value. —  This  is  the  face,  or  stated  value,  of  each  share  of  stock.  If  the  shares  are  issued 
for  one  hundred  dollars  each,  this  sum  is  the  Par  Value.  The  term  "Nominal  Value"  has  the  same 
meaning. 

Market  Value.  —  This  is  the  value  of  stock  as  determined  by  its  purchase  and  sale  on  the 
market.  It  may  be  greater  or  less  than  the  par  value  according  to  the  profits  and  financial  condition  of 
the  corporation. 

Quotations. —  These  are  the  published  price  lists,  showing  the  market  value  of  the  various  classes  of 
stock  that  are  dealt  with  in  the  stock  market.  Stock  quotations  are  usually  published  in  the  financial 
columns  of  the  leading  newspapers. 

Stock  Exchange. —  This  is  an  organization  of  dealers  in  various  classes  of  stock,  which  organization 
Is  effected  for  the  purpose  of  facilitating  the  purchase  and  sale  of  shares.  There  is  a  general  stock 
exchange  in  nearly  every  large  city. 

Limited  Corporations. — The  laws  of  some  States  provide  for  the  organization  of  Limited  Associa- 
tions. Such  associations  are  usually  merely  corporations  under  another  name.  In  the  case  of  companies 
of  this  character,  the  word  "Limited"  is  always  written  or  printed  on  the  commercial  paper  and  othei 
documents  issued  by  the  company,  as  "Union  Iron  Works,  Limited." 

Double  Liability. — United  States  National  Banks  are  said  to  be  corporations  of  Double  Liability,  as 
the  stockholder,  in  case  of  the  bank's  failure,  is  liable  for  the  amount  of  his  investment  plus  an  assess- 
ment equal  thereto. 

Trust. —  A  trust  is  an  organization  composed  of  several  corporations,  and  is  effected  by  a  transfer 
by  the  stockholders  of  each  corporation  of  a  majority  of  the  stock  to  the  control  of  a  central  committee, 
or  board  of  trustees  of  the  trust,  who  issues  in  return  for  the  shares  transferred  certificates  to  the  stock- 
holders, showing  that  they  are  entitled  to  dividends  upon  the  shares  transferred.  In  parting  with  their 
stock,  the  stockholders  retain  their  right  to  the  profits  arising  from  its  possession,  but  they  lose  the  voting 
power  belonging  to  it,  thus  placing  entire  control  of  the  several  corporations  in  the  hands  of  the  central 
committee,  or  Board  of  Trustees  of  the  trust. 

The  formation  of  trusts  in  this  m  Miner-has  been  forbidden  by  the  United  States  laws,  as  well  as  by  the 
laws  of  a  number  of  States.     Trusts  are  formed  for  the  purpose  of  centralizing  and  unifying  the  business  of 


CORPORATIONS  165 

the  several  corporations  composing  them.  Sometimes  these  corporations  effect  the  same  result  by  surrender- 
ing their  charters,  and  organizing  themselves  into  an  entirely  new  corporation,  which  has  for  its  capital  the 
united  stock  of  the  several  corporations  forming  it. 

Syndicate. —  This  is  an  association,  or  combination  of  individuals,  business  firms,  or  corporations, 
formed  for  the  purpose  of  promoting  some  special  enterprise,  or  sometimes,  for  the  purchase  of  national  or 
municipal  bonds,  etc.  A  syndicate  is  not  a  permanent  organization,  but  merely  a  temporary  organization 
of  capitalists,  individuals,  or  corporations,  for  the  accomplishment  of  a  single  object,  the  syndicate  being 
dissolved  when  the  object  for  which  it  was  formed  has  been  accomplished. 

Bonus. —  A  Bonus  is  a  voluntary  compensation,  valuable  concession,  or  grant,  which  is  given  to 
individuals  or  corporations,  as  an  inducement  for  them  to  engage  in  some  business  enterprise  of  general 
benefit  to  the  persons  conferring  the  bonus.  Thus  the  merchants  of  a  town,  or  the  town  corporation  itself, 
might,  grant  as  a  bonus,  buildings,  land,  water-power,  or  even  cash,  as  an  inducement  to  those  receiving  the 
bonus,  to  engage  in  a  manufacturing  enterprise  within  the  limits  of  the  town. 

Waiver  of  Notice. — It  is  customary  when  stockholders  or  directors  of  a  corporation  wish  tc 
hold  a  meeting  at  some  other  date  or  in  some  other  manner  than  provided  for  in  the  by-laws,  to 
waive  the  usual  notice  of  such  meeting  and  agree  that  it  shall  be  held  at  an  earlier  date,  or  at 
some  date  other  than  that  specified  in  the  by-laws.     The  usual  form  of  such  waiver  is  as  follows : 

WAIVER    OF    NOTICE — (Of  the  First  Stockholders')  Meeting 

The  subscribers  hereto,  being  all  of  the  stockholders  (or  directors)  of  the  H.  B.  Burton  Mercantile 
Company,  do  hereby  waive  notice  of  thj  (first  stockholders')  meeting  of  the  said  company  to  be  held 

at ,  in  the  city  of ,  State  of ,  on  the day 

of 19.  .  .,  at  the  hour  of   o'clock  P.   M.;    and  agree  to  said  meeting  being 

held  at in  the  city  of   ,  State  of   ,  on  the   day 

of 19 ,  at  the  hour  of o'clock  P.   M. 

Signed  (By  all  Stockholders  or  Directors). 

By-Laws. — The  by-laws  are  the  rules  to  govern  the  conduct  of  the  corporation.  They  must  not 
conflict  with  the  statute  laws  of  the  state  in  which  the  corporation  is  established.  The  following 
include  the  points  to  be  covered,  but  the  learner  is  to  understand  that  the  by-laws  will  be  varied  to 
meet  the  conditions  of  the  business  to  which  they  apply  : 

By-Laws  of  the  H.  B.  Burton  Mercantile  Company 

1.  Annual  Meeting. — The  annual  meeting  of  the  stockholders  of  this  corporation  shall  be  held 
on  the  second  Tuesday  of  January  (or  other  date>  in  each  year,  at  the  hour  of  seven-thirty  o'clock . 

P.  M.,  at  the  office  of  the  said  company,  in  the  city  of ,  or  at  such  other  place  as  shall 

be  selected  from  time  to  time  by  the  directors.  At  each  annual  meeting  these  stockholders  shall 
elect,  by  ballot,  a  board  of (state  number)  directors  who  shall  be  stockholders  in  this  cor- 
poration, and  who  shall  be  elected  for  a  term  of  one  (or  more)  year,  and  to  hold  such  office  until 
their  successors  shall  be  elected. 

2.  Quorum. — A  quorum  of  stockholders  shall  consist  of  the  holders  of  a  majority  of  the  capita] 
stock  of  this  corporation  at  the  time  outstanding,  being  present  in  person  or  by  proxy. 

3.  Votes. — Each  share  of  stock  in  this  corporation  issued  and  outstanding  shall  entitle  the 
holder  thereof,  or  his  lawful  representative,  to  cast  one  vote  on  all  questions  coming  before  any  meet- 
ing of  the  stockholders. 

4.  Proxies. — Stock  in  this  corporation  may  be  voted  upon  by  the  holder  thereof  either  in 
person  or  by  proxy;  proxies  to  be  operative  must  be  in  writing  signed  by  the  president  or  vice-presi- 
dent and  the  secretary  of  this  corporation. 

5.  Notice  of  Annual  Meeting. — Notice  of  the  time  and  the  place  of  holding  the  annual  meet- 
ing shall  be  sent  by  the  secretary  of  this  corporation,  by  mail,  to  each  stockholder (state  num- 
ber) days  prior  to  the  date  of  holding  such  meeting. 

6.  Special   Meeting   of   Stockholders. — Special    meetings    of    stockholders    may    be   called    by 


166  CORPORATIONS 

the  president  of  this  corporation,  or  by  a  majority  of  the  board  of  directors,  or  by  the  holders  of  a 
majority  of  the  capital  stock  of  this  company,  by  filing  with  the  secretary  of  this  corporation  a  written 
call  for  such  meeting  signed  by  the  persons  calling  it.  Upon  receipt  of  such  call,  the  secretary  shall 
mail  one  copy  to  each  stockholder  in  the  same  manner  as  provided  for  in  paragraph  five  of  these  by- 
laws. 

7.  Meeting  of  the  Board  of  Directors. — Meetings  of  the  board  of  directors  shall  be  held 
monthly  and  shall  be  held  at  such  time  and  place  and  in  such  manner  as  the  board  may  by  resolu- 
tion prescribe.  Or  the  board  of  directors  may  be  convened  persuant  to  the  call  of  the  president,  who 
shall  send  each  member  thereof  such  notice  as  he  shall  deem  necessary  according  to  the  circumstances. 

8.  Quorum  of  Directors. — A  majority  of  the  board  of  directors  properly  convened  shall  con- 
stitute a  quorum. 

9.  Officers. — As  soon  as  may  be  after  the  annual  election  of  directors  for  the  ensuing  year, 
the  board  of  directors  shall  convene,  and  it  shall  elect  from  among  its  members  a  President,  a  Vice- 
President,  a  Secretary,  and  a  Treasurer.  The  said  board  of  directors  may  also  appoint  such  other 
officers  and  agents  to  act  by  and  under  the  direction  of  the  board  of  directors  as  they  may  see  fit. 

(Here  recite  the  duties  of  the  president,  vice-president,  secretary,  and  treasurer.) 

10.  Joinder  of  Offices. — Any  two  of  the  offices  herein  provided  may  be  held  and  exercised 
by  one  person. 

11.  Vacancies. — In  case  of  a  vacancy  occurring  in  any  office  or  in  the  board  of  directors,  such 
vacancy  may  be  filled  by  appointment  of  any  stockholder  in  this  corporation  thereto,  which  appoint- 
ment shall  be  made  by  a  quorum  of  the  board  of  directors  duly  convened. 

12.  Orders  for  Payment  of  Money. — All  checks,  drafts,  and  other  orders  for  the  payment 
of  money  shall  be  signed  by  the  president  and  treasurer  of  this  corporation. 

13.  Promissory  Note. — All  promissory  notes  made  payable  on  this  corporation  shall  be  exe- 
cuted in  the  corporation  name  by  the  president  and  treasurer  thereof. 

14.  Corporate  Signature. — The  execution  of  any  instrument  made  by  this  corporation  may 
be  in  the  following  form: 

The  Burton  Mercantile  Company. 

By 


(Official  Designation) 

15.  Corporate  SeQ.1. — This  corporation  shall  have  a  corporate  seal,  and  the  secretary  shall  be 
the  custodian  thereof,  with  full  power  to  affix  it  to  such  instruments  as  shall  require  its  use  either  by 
law  or  by  resolution. 

16.  Fiscal  Year. — The  fiscal  year  of  this  corporation  shall  end  on  the  last  secular  day  of 
December  (or  other  date)  of  each  year. 

17.  Transfer  of  Stock. — All  transfers  of  stock  in  this  corporation  shall  be  made  upon  the 
corporate  books  by  the  holder  of  the  shares  in  person  or  by  attorney,  and  shall  not  be  deemed  com- 
plete and  binding  upon  the  company  until  it  shall  have  been  so  made,  and  until  the  certificate  thereof 
shall  have  been  surrendered  to  the  company  and  new  certificates  shall  have  been  issued  instead  thereof. 

18.  Dividends. — Dividends  when  earned  and  declared  upon  the  stock  of  this  corporation  shall 
be  payable  on  the  second  Tuesday  of  January  (or  other  date)  of  each  year. 

19.  Amendments. — The  stockholders  of  this  corporation  may  be  a  majority  vote  of  a  quorum 
present  at  any  annual  meeting  or  at  any  special  meeting  for  that  purpose  mentioned  in  the  notice 
thereof  as  one  of  the  said  meeting's  objects,  alter,  amend,  or  repeal  these  by-laws,  or  any  of  them. 

Two  Sets  of  Books. — The  corporation  laws  of  the  different  States  vary  so  widely  that  it  would 
not  only  be  useless  but  unprofitable  and  a  hindrance  to  the  learner  for  any  text  to  attempt  to  give 
all  the  variations  to  a  class.  The  student  is  to  understand  at  the  outset  that  the  purpose  of  a  text 
on  corporation  bookkeeping  is: 

1.  To  set  out  the  general  method  of  presenting  corporation  accounts  and  records  in  account 
and  record  form. 

2.  To  set  out  the  relations  between  the  two  sets  of  books  in  corporation  bookkeeping  which  are: 
(1.)  Books  of  Account,  or  the  financial  books,  and  account  keeping,  which  will  be  practically  the  same 
as  the  financial  books  and  the  account  keeping  used  in  any  other  similar  business.  (2.)  Corporate 
Books:    such    as,    Stock    Subscription    Book,    Stock   Certificate    Book,    Stock    Installment  "Book, 


CORPORATIONS  167 

Installment  Receipt  Book,  Assessment  Book,  Stock  Journal,  Installment  Ledger,  and  Stock 
Ledger. 

The  Minute  Book  is  the  official  record. 

The  learner  is  to  understand  that  he  is  to  look  to  the  statute  laws  of  the  particular  State  in  which 
he  may  be  keeping  books,  and  to  see  that  he  does  not  interpret  the  by-laws  in  such  way  as  to  bring 
them  in  conflict  with  the  statute  laws  of  the  State  in  which  the  corporation  is  to  be  conducted. 

The  Secretary  of  State  in  most  States  will  have  printed  for  free  distribution  a  pamphlet  or  cir- 
cular on  the  corporation  laws  of  his  State.  If  the  teacher  will  write  the  Secretary  of  State  about 
ten  days  before  taking  up  the  work  of  corporations,  he  can,  in  all  probability,  secure  the  corporation 
laws,  with  specific  directions  for  their  application  in  his  State. 

Minute  Book.— It  is  customary  to  keep  a  complete  and  careful  record  of  all  of  the  official  acts 
of  a  corporation,  and  a  detailed  account  of  all  the  proceedings  of  the  official  meetings,  whether  of  the 
stockholders  themselves  or  of  the  Board  of  Directors.  In  some  States  such  records  are  especially 
required  by  law.  These  records  are  usually  kept  by  the  secretary  of  the  corporation,  in  an  ordinary 
blank  book  provided  for  that  purpose,  and  called  a  Minute  Book. 

The  president  of  the  corporation,  who  is  also  usually  president  of  the  Board  of  Directors,  presides  at 
all  meetings,  or  in  his  absence  this  duty  may  be  performed  by  the  vice-president. 

The  procedure  at  corporation  meetings  is  the  same  as  that  of  public  gatherings  generally,  and  is 
governed  by  ordinary  parliamentary  usage. 

The  following  minutes  of  the  first  two  meetings  of  the  Union  Iron  Works  will  illustrate  the  proper 
method  of  making  the  required  records: 

Minute  Book  of  the  Union  Iron  Works 

Cincinnati,  O.,  Aug.  10,  19 — 

In  accordance  with  a  published  call,  the  subscribers  of  stock  in  the  proposed  corporation,  ' 4  The  Union 
Iron  Works,"  assembled  upon  the  above  date  at  the  private  office  of  I.  0.  Chapman,  236  Main  St.,  for  the 
purpose  of  perfecting  arrangements  for  the  org  nization  of  a  corporation. 

The  following  subscribers  were  present :  I.  0.   Chapman,  C.  C.   Campbell,   W.  D.  Hampton,  L.  M 
Goodyear,  H.   B.   Burton. 

The  meeting  was  called  to  order  by  L  0.  Chapman,  who  briefly  stated  the  purpose  of  the  meeting, 
concluding  his  remarks  by  nominating  C.  C.  Campbell  for  chairman  of  the  meeting.  Mr.  Campbell  was 
unanimously  chosen,  and,  on  motion,  H.  B.  Burton  was  appointed  to  act  as  temporary  secretary. 

The  chairman  then  announced  that  the  entire  amount  of  the  proposed  capital  stock,  Forty  Thousand 
Dollars,  had  been  duly  subscribed,  and  that  a  sum  equivalent  to  ten  per  cent,  of  this  stock  had  been  paid 
to  H.  B.  Burton,  to  be  held  subject  to  the  order  of  the  company. 

He  also  announced  that  the  Articles  of  Incorporation  had  been  duly  prepared,  and  he  suggested  that  the 
same  be  read  by  the  secretary,  which  was  done.  Af U  r  some  discussion,  the  Articles  of  Incorporation  as 
read  by  the  secretary,  were,  on  motion,  unanimously  adopted. 

Upon  motion  of  W.  D.  Hampton,  the  meeting,  by  unanimous  vote,  instructed  Mr.  H.  B.  Burton, 
secretary  pro  tern.,  to  cause  the  articles  of  incorporation  to  be  filed  with  the  Secretary  of  State,  and  that 
Mr.  Burton,  also,  in  behalf  of  the  company,  take  all  necessary  steps  to  secure  the  legal  organization  of 
the  corporation. 

Upon  motion  of  L.  M.  Goodyear,  it  was  resolved  that  the  chairman  appoint  a  committee  of  three 
subscribers,  to  prepare  a  code  of  by-laws  for  the  government  of  the  corporation,  and  said  committee  to  make 
its  report  at  the  next  meeting.  The  following  committee  was  appointed  to  prepare  such  code  of  by-laws  : 
L.  M.  Goodyear,  I.  0.  Chapman,  H.  B.  Burton. 

After  some  further  informal  discussion  of  corporation  affairs,  the  meeting  adjourned  to  Saturday, 
Aug.   17,  19-,     upon  whieh  date  the  permanent  organization  is  to  be  effected. 

Signed, 

Approved,  H.  B.  Burton,  Secretary  pro  tern. 

C.  C.  Campbell,  Chairman  pro  tern. 

Note. —  After  the  minutes  have  been  approved  at  a  subsequent  meeting,  they  should  be  countersigned  by  the 
president  as  above. 


168  CORPORATIONS 

Cincinnati,  0.,  Ana.  17,  19 — 
On  the  above  date,  an  adjourned  meeting  of  the  subscribers  to  the  stock  of  the  proposed  corporation, 
"The  Union  Iron  Works,"  was  held  at  the  private  office  of  I.  0.  Chapman,  236  Main  St.     The  following 
persons  were  present :  I.  0.    Chapman,    C.  C.  Campbell,  W.  D.  Hampton,  L.  M.  Goodyear,  H.  B.   Burton. 
The  meeting  was  called  to  order  by  the  chairman  pro  tern. ,  C.  C.  Campbell. 
The  minutes  of  the  previous  meeting  were  read  and  approved. 

The  chairman  then  announced  that  the  articles  of  incorporation  had  been  filed  with  the  State 
authorities  in  accordance  with  law. 

Mr.  L.  M.  Goodyear,  of  the  committee  appointed  at  the  previous  meeting  to  prepare  by-laws  for  the 
government  of  the  corporation,  then  presented  the  report  of  said  committee. 

After  some  discussion,  the  report  of  this  committee  was,  with  some  alterations,  unanimously  adopted, 
and  the  secretary  was  instructed  to  transcribe  the  by-laws  as  adopted,  in  a  book  to  be  provided  for  this 
purpose. 

Upon  motion,  the  meeting  then  proceeded  to  the  election  of  the  permanent  officers,  as  required  by  the 
by-laws  of  the  corporation.  The  following  officers  were  chosen  by  ballot,  to  serve  for  one  year  from  the 
date  of  their  election :  — 

President  —  I.  0.  Chapman.  Vice-President  —  C.  C.  Campbell. 

Secretary  and  Accountant  —  H.  B.  Burton.  Treasurer  —  L.  M.  Goodyear. 

General  Manager  —  W.  D.  Hampton. 
Directors  —  I.  0.  Chapman,  C.  C.  Campbell,  H.  B.  Burton,  L.  M.  Goodyear,  and  W.  D.  Hampton. 
The  meeting  then  adjourned  subject  to  the  call  of  the  president. 

Signed, 
Approved,  H.  B.  Burton,  Secretary. 

I.  0.  Chapman,  President 

REGULAR  MEETINGS 

After  a  corporation  has  been  duly  organized,  the  regular  meeting  of  the  stockholders  usually  occurs  but 
once  a  year,  but  special  meetings  may  be  called  at  any  time  by  the  president  or  directors  of  the  corporation. 

The  affairs  of  the  corporation  are  then  under  the  control  of  the  Board  of  Directors,  and  the  by-laws 
usually  provide  for  the  regular  meetings  of  this  board. 

The  secretary  of  the  corporation  is  usually  also  the  secretary  of  the  Board  of  Directors. 

The  following  will  illustrate  the  usual  method  of  recording  the  minutes  of  the  regular  meetings  of  the 
directors  after  a  corporation  has  been  duly  organized. 


niNUTES  OF  A  REGULAR  riEETING  OF  THE  DIRECTORS  OF  THE  UNION  IRON  WORKS 

Detroit,  Mich.,  Aug.  30,   19 — 

The  regular  meeting  of  the  directors  of  the  aforesaid  company  was  held  at  the  company's  office  upon 
the  above  date,   the  following  officers  and  directors  being  present:    President,  I.  0.   Chapman;  Secretary 
H.  B.  Burton;  Directors,  C.  C.  Campbell,  L.  M.  Goodyear,  W.  D.  Hampton. 

The  minutes  of  last  meeting  were  read  and  approved. 

Director  H.  B.  Burton  offered  the  following  resolution,  which,  after  some  discussion,  was,  on  motion, 
duly  adopted  . 

Resolved,  That  the  president  and  secretary  be  and  are  hereby  authorized  to  issue  notes  of  this  company 
to  Messrs.  I.  0.  Chapman  and  C.  C.  Campbell  respectively,  for  all  personal  property  turned  over  by  each  to 
this  company,  in  excess  of  the  amount  necessary  to  cover  their  subscriptions  to  the  capital  stock  of  this 
company 

Secretary  H.  B.  Burton  announced  his  intention  of  being  temporarily  absent  from  the  city,  and  suggested 
that  a  temporary  secretary  should  be  chosen  to  attend  to  the  duties  of-  that  office  during  the  secretary's 
absence.  On  motion  of  Director  F.  R.  Ott,  Director  Robert  Long  was  selected  to  act  as  such  temporary 
secretary. 

On  motion,  the  Board  of  Directors  then  adjourned  until  the  next  regular  meeting. 
Approved,  -  H.  B.  Burton,  Secretary. 

John  Alexander,  President. 


CORPORATIONS 


169 


STOCK  SUBSCRIPTION  BOOK 

The  Stock  Subscription  Book  is  simple  in  its  construction  and  use,  and  generally  contains  a  printed  con- 
tract at  the  top  of  each  page,  which  constitutes  an  agreement  between  the  company  and  the  stockholders 
that  the  latter  will  receive  and  pay  for  the  stock  subscribed.  The  act  of  signing  this  book,  alone,  is  suffi- 
cient to  make  each  subscriber  personally  liable  to  the  company  for  the  par  value  of  the  stock  for  which  he 
has  subscribed. 

This  book  is  opened  for  subscriptions  as  soon  as  the  formation  of  the  company  has  been  decided 
upon.  The  stock  may  all  be  subscribed  at  once,  in  which  case  this  book  will  be  closed  against  further  sub- 
scription ;  or  the  stock  may  be  only  partially  subscribed  at  the  time  of  organizing,  the  Stock  Subscription 
Book  remaining  open  indefinitely  for  additional  subscriptions. 

When  the  membership  of  a  company  is  limited  to  a  small  number  of  subscribers,  and  when  transfers  of 
stock  are  not  likely  to  occur,  the  Stock  Subscription  Book  may  be  dispensed  with,  the  record  of  subscrip- 
tions being  kept  on  a  Subscription  Sheet,  which  is  preserved  with  the  other  documents  of  the  corporation. 
An  ordinary  sheet  of  journal  paper  may  be  used  for  a  Subscription  Sheet,  it  being  ruled  similar  to  the 
Stock  Subscription  Book.  Under  some  circumstances,  when  a  partnership  is  organized  into  a  stock  com- 
pany, no  formal  subscription  of  stock  is  necessary. 


STOCK  SUBSCRIPTION  BOOK 

We,    the   undersigned,  do  hereby   subscribe  for  mid  agree  to  take  the  number  of 
Shares  of  Capital  Stock  at        &<&        value  in  the  ^ion  &on  Words  {Limited) 

set  opposite  our  respective  names. 


Date 

Name 

ADDRtSS 

No.  of  Shares 

Am'c  in 
Dollars 

49 

Sdup. 

4 

J. 

vs.      io//afiman 

VHncinnatt 

Cfne  //wnaret/ 

400 

40, 000 

<#. 

v).      vamftlc/t 

" 

C/kc   ftum/rett  ftftu 

450 

45, 000 

w: 

Qz).    2namfifon 

Jo/eve/an</ 

jeventu-five 

75 

7,500 

-Z.     <Al.     cfccdyeat* 

Je/eao 

9*fy 

50 

5,000 

2?£    £$.     98arton 

winct'nna/t 

iStcenfu-fiite 

25 

2500 

STOCK  CERTIFICATE   BOOK 


The  Stock  Certificate  Book  is  a  book  of  prepared  certificates  and  corresponding  stubs,  in  the  form  of 
an  ordinary  note  or  draft  book.  These  certificates  are  properly  filled  out,  and  signed  by  the  president  and 
secretary  of  a  company,  and  then  issued  to  each  subscriber  in  his  own  name,  as  evidence  of  his  title  to  the 
within  described  number  of  shares  in  the  capital  stock  of  the  company.  Some  companies  prefer  to  have 
their  certificates  so  arranged  as  to  show  the  amount,  or  per  cent.,  actually  paid  in  on  the  stock,  and  when  an 
additional  installment  is  paid,  the  old,  or  first  certificate  is  taken  up  and  a  new  one  is  issued  in  its  place, 
including  all  payments.  Another  method  is  to  have  a  sufficient  number  of  blank  lines  across  the  left-hand 
end  on  the  back  of  the  certificates,  to  admit  a  record  of  the  specified  number  of  installments  to  be  paid. 
These  lines  should  be  filled  out  in  the  order  of  the  payments,  and  each  of  these  indorsements  should  be 
signed  by  the  secretary  of  the  company. 
11 


170 


CORPORATIONS 


The  stub  usually  contains  a  receipt  for  the  certificates  of  stock  issued,  which  receipt  the  stockholder 
is  expected  to  sign  when  he  receives  the  certificate.  In  the  following  form  of  certificate,  the  statement 
included  in  brackets  on  the  stub  is  to  be  used  only  when  the  certificate  is  issued  in  making  a  transfer  of 
stock  where  an  old  certificate  is  taken  up.  It  should  be  canceled,  or  marked  out,  when  the  certificate  is 
issued  for  original  shares. 

When  a  certificate  of  stock  is  sold  or  transferred,  it  should  be  indorsed  across  its  face  by  the  person 
making  the  transfer,  as  follows:   "Transferred  in  favor  of  M.  J.  Pease,  Jan.  10,  19-      L.  M.  Goodyear." 

In  case  only  a  part  of  the  stock  is  transferred,  then  the  old  certificate  should  be  indorsed  as  follows: 
"Transferred  ten  shares  of  the  within  stock  to  J.  E.  Martin.  Nov.  20,  19-        John  Smith." 


S» 


I! 


V 


3 


0 


K 


£ 

j* 

c 

"* 

<^> 

•« 

& 

A 

<a 

!b 

-<i 

Vj 

<3 

9 

<^ 

"5; 

s^. 

^ 

"W 

"*»     .C 

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a    > 

.$ 

s 


8   "* 


c< 


•AaNO  saadSNvax  hoh 


ARTICLES   OF  INCORPORATION 


0/__ ^mtn  $4*n    fyfuA- 


We,  the  undersigned,  desiring  to  become  incorporated  under  the  provisions  of  the  statutes  in  such  cases 
made  and  provided,  do  hereby  make,  execute,  and  adopt  the  following  articles  of  association ;  to  wit : 

ARTICLE  I 

The  name  assumed  by  this  corporation,  and  by  which  it  shall  be  known  in  law,  is 

nit'en  ©/ten    (yfhwd 


ARTICLE  II 

The  purpose  or  purposes  of  this  corporation  are  as  follows : 

fflwe  manu/ac/ieie  ant/  da/e  #/  d/cam  en/pined   tznt/  vet&id- 


ARTICLE  III 

The  capital  stock  of  the  corporation  hereby  organized  is  the  sum  of. —(G/fd/?/  @/A#f£d€M</~. 

._ - dollars,  and  the  number  of  shares  thereof  is 


jfotei  Aunt/iee/- 

ARTICLE  IV 

The  amount  of  said  stock  actually  paid  in  at  th,i  date  hereof  is  the  sum  of~ <<5/&ivM... 


fflrtcitdiint/— 


— dollars,  being ^..■/OO per  cent,  of  said 

capital  stock. 

ARTICLE  V 

The  operations  of  this  corporation  are  to  be  carried  on  in  the  county  of «J^%^nf/wn 

State  of. '. (Qf/e£e and  the  office 

for  the  transaction  of  business,  within  the  State  of. (Qi/uh, shall  be  kept  at 


©4t>.  $</<?  ^Jai/  (&k,   ^Mcmna/i- 


ARTICLE  VI 

The  term  of  existence  of  this  corporation  u  fixed  at ~j$j$fi    tyGrtid- from 

the  date  hereof. 

[171] 


man', 


Hit  IKHttnCSS  IKUbCtCOf,  We,  the  parties  hereby  associatina.  for  the  vurvose  of  giving  legal  effect  to  these 
articles,  have  signed  our  names,  our  places  of  residence,  and  the  number  of  shares  of  stocK  held  by  each  in  ihe 
Signature  Book  of  this  Company. 

State  of. Qfe ) 

County  of. <Q4Q&iidfcn— I 

On  this _ 


entfl day  of. ; (Cjfctrauilt... 19 ,     before  me  a 

^l^/ec. in  and  for  said  County,  personally  appeared ©*.    \J.      %)Mdfe- 

l&amAtfe/^   Qfc    W-    tgWamd/en,    Qf    Qwq.    CS/oeaueai.    and 
'ai/#n, — 


known  to  me  to  be  the  persons  who  are  named  in,  and  who  executed,  the  foregoing  instrument  and  severally 
acknowledged  that  they  executed  the  same  freely,  and  for  the  intents  and  purposes  therein  mentioned. 


[172] 


•  CORPORATIONS  173 

OPENING   CORPORATION    BOOKS 

The  methods  of  opening  corporation  books  are  by  no  means  uniform.  Different  methods  may  be 
employed  by  different  accountants,  and  the  methods  will  vary  with  the  peculiarities,  or  special  requirements, 
of  the  business  in  which  the  corporation  is  engaged.  We  give  herewith  a  number  of  standard  methods  of 
opening  that  are  adapted  to  the  varying  requirements  of  corporation  business. 

The  explanatory  opening  entry  ordinarily  used  in  the  books  of  a  single  proprietor  or  a  partnership 
business,  is  not  employed  on  opening  the  Journal  of  a  corporation,  as  the  subject  matter  of  the  opening 
entry  is  found  in  the  Charter,  Minute  Book,  By-laws,  etc.,  of  the  corporation. 

OPENING  ENTRIES 

I.  0.  Chapman,  C.  C.  Campbell,  W.  D.  Hampton,  L.  M.  Goodyear,  and  H.  B.  Burton  have  organized 
a  stock  company,  with  a  Capital  Stock  of  $40,000,  divided  into  400  shares  of  $100  each,  for  the  purpose 
of  manufacturing  steam  engines,  under  the  corporate  name  of  "Union  Iron  Works,"  at  218  Clark  street, 
Cincinnati,  O. 

Opening   Entry   No.  1 

1.  O.  Chapman,  100  shares  at  $100 $10,000 

C.  C.  Campbell,  150       "      "      "      15,000 

D.  W.  Hampton,   75      •«      "      "     7,500 

L.  M.  Goodyear,   50      "      "      "      5,000 

H.    B.   Burton,     25      "      "      "     2,500 

Capital  Stock $40,000 

For  nominal  amount  of  the  Capital  Stock  of  the  "Union  Iron 
Works,"  organized  this  date  upon  the  basis  of  $40,000,  divided 
into  400  shares  of  $100  each,  and  issued  to  the  incorporators  at 
par  value. 

In  the  above  opening  entry,  the  original  subscribers  are  debited  for  the  amount  of  the  subscription,  and' 
the  Capital  Stock  is  credited  for  the  entire  amount,  which  is  the  nominal  value  of  the  Capital  Stock,  until  the 
stock  subscriptions  are  all  paid,  when  it  becomes  real,  or  paid-up  capital.  An  entry  in  the  above  form 
would  not  be  employed  in  case  there  was  a  large  number  of  stockholders. 

Other  forms  of  opening  entries  would  serve  as  well  as  those  here  given.  The  principal  purpose  of 
the  opening  entry  is  the  crediting  of  Capital  Stock  for  its  nominal  value,  at  the  time  of  organizing  the 
corporation. 

When  it  is  not  desired  to  debit  each  stockholder  in  the  General  Ledger  for  the  entire  amount  of  hia 
subscription,  any  one  of  the  following  opening  entries  would  be  suitable,  although  the  subscribed  stock 
may  or  may  not  be  paid  for. 

Opening  Entry  No.  2 

Stockholders $40,000 

Capital  Stock $40,000 

For  nominal  amount  of  the  Capital  Stock  of  the  '  •  Union 
Iron  Works,"  incorporated  upon  the  basis  of  $40,000  Capital 
Stock,  divided  into  400  shares  of  $100  each,  and  issued  at  their 
par  value  to  the  incorporators  and  associates,  as  per  Subscrip- 
tion Book. 

Opening   Entry  No.  3 

Franchise $40,000 

Capital  Stock $40,000    ' 

For  the  amount  of  Capital  Stock  of  the  "  Union  Iron  Works," 
incorporated  upon  the  basis  of  $40,000  Capital  Stock,  divided  into 
400  shares  of  $100  each,  and  issued  to  the  incorporators  at  par 
value,  as  per  Subscription  Book. 


174  CORPORATIONS 

Opening  Entry  No  4 

Contingencies $40, 000 

Capital  Stock $40,000 

For  nominal  amount  of  Capital  Stock  of  the  ' '  Union  Iron 
Works,"  incorporated  upon  the  basis  of  $40,000  Capital  Stock, 
divided  into  400  shares  of  $100  each,  and  issued  at  their  par  value 
to  the  incorporators  and  associates,   as  per  Subscription  Book. 

Opening  Entry  No  5 

Unpaid  Capital $40,000 

Capital  Stock $40,000 

For  nominal  amount  of  Capital  Stock  of  the  "Union  Iron 
Works,"  incorporated  upon  the  basis  of  $40,000  Capital  Stock, 
divided  into  400  shares  of  $100  each,  and  issued  at  their  par  value 
to  the  incorporators  and  associates,  as  per  Subscription  Book. 

Opening  Entry  No  6 

Certificates  of  Stock $40,000 

Capital  Stock $40,000 

For  nominal  amount  of  Capital  Stock  of  the  « '  Union  Iron 
Works,"  incorporated  upon  the  basis  of  $40,000  Capital  Stock, 
divided  into  400  shares  of  $100  each,  and  issued  at  their  par  value 
to  the  incorporators  and  associates,  as  per  Subscription  Book. 

Opening  Entry  No  7 

Subscription $40,000 

Capital  Stock $40,000 

For  nominal  amount  of  Capital  Stock  of  the  "  Union  Iron 
Works,"  incorporated  upon  a  basis  of  $40,000  Capital  Stock, 
divided  into  400  shares  of  $100  each,  and  issued  at  their  par  value 
to  the  incorporators  and  associates,   as  per  Subscription  Book. 

The  following  opening  entries  (8  and  9)  show  how  the  books  should  be  opened  when  it  is  desired  to 
keep  an  account  with  Treasury  Stock,  which  should  represent  at  all  times  the  par  value  of  the  unsold  stock. 

Opening  Entry  No  8 

Franchise $40,000 

Treasury  Stock 10,000 

Capital  Stock $50,000 

For  nominal  amount  of  the  Capital  Stock  of  the  Globe  Fur- 
niture Co.,  organized  upon  a  basis  of  $50,000  Capital  Stock,  divided 
into  1,000  shares  of  $50  each,  of  which  800  shares  are  subscribed  for 
upon  organizing,  the  remaining  200  shares  being  held  as  Treasury 
Stock,  to  be  sold  when  necessary  for  operating  purposes. 

entries  for  the   SALE  op  treasury   stock  when  the   treasury   stock  account  has  been  debited 

in  the  opening  entry 

Sold  at  Par.—  When  any  of  the  Treasury  Stock  is  sold  at  its  par  value,  make  one  of  the  following 
entries  : 


CORPORATIONS  175 

1.  If  it  is  paid  for  in  full,  debit  Franchise  and  credit  Treasury  Stock;  then  debit  Cash  and  credit 
Franchise. 

2.  If  it  is  not  paid  for  when  sold,  i^.e  above  entries  may  be  omitted  until  such  times  as  payments  are 
made.  This  plan  would  undoubtedly  be  preferable  in  cases  where  the  original  stockholders  were  not  debited 
for  their  subscription. 

3.  Or,  if  preferred,  when  the  stock  is  not  paid  for  at  the  time  of  the  sale,  the  buyer  may  be  debited 
and  Treasury  Stock  credited;  but  when  it  is  paid  for,  debit  Cash  and  credit  the  buyer. 

Sold  at  a  Premium. —  When  any  of  the  Treasury  Stock  is  sold  at  a  premium,  make  one  of  the 
following  entries  : 

1.  If  it  is  paid  for  in  full,  debit  Franchise  and  credit  Treasury  Stock  for  the  par  value  of  the  stock 
only;  then  debit  cash  for  the  full  amount  received  and  credit  Franchise  for  the  par  value  of  the  stock  only; 
and  then  credit  Stock  Premium  and  Discount  for  the  amount  of  the  premium. 

2.  If  it  is  not  paid  for  when  sold,  the  above  entries  may  be  omitted  until  such  times  as  payments 
are  made. 

3.  Or,  if  preferred,  when  the  stock  is  not  paid  for  when  sold,  the  buyer  may  be  debited  for  the  pur- 
chase price  of  the  stock,  and  Treasury  Stock  credited  for  the  par  value  of  the  stock  only  ;  and  then  credit 
Stock  Premium  and  Discount  for  the  amount  of  the  premium ;  but  when  it  is  paid  for,  debit  Cash  and  credit 
the  buyer. 

Sold  at  a  Discount. —  When  any  of  the  Treasury  Stock  is  sold  at  a  discount,  make  one  of  the  follow- 
ing entries  : 

1.  If  it  is  paid  for  in  full,  debit  Franchise  and  credit  Treasury  Stock  for  the  par  value  of  the  stock; 
then  debit  Cash  for  the  amount  received,  and  debit  Stock  Premium  and  Discount  for  the  amount  of  the  dis- 
count, and  credit  Franchise  for  the  par  value. 

2.  If  it  is  not  paid  for  when  sold,  the  above  entries  may  be  omitted  until  such  times  as  payments 
are  made. 

3.  Or,  if  preferred,  when  the  stock  is  not  paid  for  in  full  when  sold,  debit  the  buyer  for  the  purchase 
price  of  the  stock,  and  Stock  Premium  and  Discount  for  the  amount  of  the  discount,  and  credit  Treasury 
Stock  for  the  par  value  of  the  stock ;  and  when  paid  for,  debit  Ca3h  and  credit  the  buyer. 

The  following  entries  are  given  to  illustrate  the  necessary  journal  entries  to  be  made  when  Treasury 
Stock  is  sold  at  a  discount '. 

Franchise $2,500 

Treasury  Stock $2,500 

For  the  par  value  of  25  shares  of  Treasury  Stock  sold  to  E.  B. 
Reed  at  a  discount  of  5%,  and  paid  for  as  per  the  following  entry  : 

Cash  per  C.  B.,  p.  6 $2,375 

Stock  Premium  and  Discount 125 

Franchise $2,500 

For  payment  of  25  shares  of  Treasury  Stock  sold  to  E.  B.  Reed 
at  a  discount  of  5%. 

Forfeited  Stock. —  It  is  quite  frequently  the  case  that  stock  is  forfeited  to  the  company  on  account  of 
delinquent  payments.  The  by-laws  of  some  companies  provide  for  delinquent  payments  by  requiring  the 
stockholder  to  surrender  the  stock  in  favor  of  the  company,  thus  forfeiting  his  right  and  title  to  the  stock, 
and  losing  all  he  has  paid  on  it.  But  most  companies  advertise  the  stock  upon  which  there  are  delinquent 
payments,  to  be  sold  at  public  sale.  The  balance  which  remains  after  paying  the  delinquency,  advertising, 
and  cost  of  sale,   is  returned  to  the  stockholder. 

The  entry  to  be  made  for  a  transaction  of  this  kind  depends  entirely  upon  the  style  of  entry  that  was 
used  in  opening  the  books. 

If  the  books  were  opened  by  debiting  Franchise  and  Treasury  Stock  and  crediting  Capital  Stock,  we 
would  debit  Treasury  Stock  and  credit  Franchise  for  the  par  value  of  the  stock  only ;  then  we  would  debit 
Franchise  and  credit  Forfeitures  for  the  amount  that  had  been  paid  on  the  stock. 

If  a  plain  journal  entry  was  used,  for  instance, 

Franchise $40,000 

Capital  Stock $40,000 

then  we  would  debit  Franchise  and  credit  Forfeitures  for  the  amount  that  had  been  paid  on  the  stock. 


176 


CORPORATIONS 


eitinat 


/ 


— — — _ — — . __ 


DATE. 


19 


ISSUED  IN  FAVOR  OF 


^//      @R.   Q.    ^/a/tman 


V.   {Mai/en 


an 


Jo  A  ©4*  ^4 


'■■Qtivy 


NEW  CERTIFICATE  ISSUED. 


LedgerFolio    Noof  N    Sh         To",  No. 
Gen.      Stock.  Issued     °wned-        Sold. 


SIGNATURE  OF  SURRENDERER 
(Subject  to  By-laws  of  Company.) 


* 

/ 

■/ 

Joo 

5 

/ 

J 

iso 

6 

6 

/ 

J 

T* 

6 

r 

J 

4 

60 

4 

J 

S 

JS 

9 

J 
J 

6 
7 

5 
6 

zm/i/en  vm 


vaa4 


Stock  Journal,  or  Transfer  Book. —  This  book  contains  a  record  of  all  the  stock  transferred  by 
the  individual  stockholders  to  other  parties.  There  are  various  forms  in  general  use,  some  of  which  admit 
only  a  record  of  the  stock  actually  transferred,  while  the  more  improved  forms,  as  the  one  herewith  given, 
permit  a  full  enrolment  of  all  the  original  stock  issued.  All  transfers  of  stock  must  be  first  entered  in 
this  book;  that  is,  the  original  entries  for  all  transfers  of  stock  are  made  in  this  book  only,  and  not  in  the 
ordinary  Journal.  All  entries  in  the  Stock  Journal  are  posted  direct  to  the  Stock  Ledger.  The  General 
Ledger  folios  are  entered  in  this  book  as  a  matter  of  convenience  only.  The  Stock  Journal  must  be  signed 
by  the  party  transferring  the  stock,  or  by  his  legal  representative. 

Use  of  the  Stock  Journal. —  Enter  in  this  book  all  stock  issued  at  the  time  of  organizing  or  there- 
after, the  same  as  the  first  five  entries  are  entered  on  the  accompanying  form  of  Stock  Journal.  The  last 
two  entries  represent  stock  that  has  been  transferred.  The  ledger  folio  columns  on  the  debit  side  of  the 
book  are  used  in  posting  the  entries  at  the  time  of  issuing  the  stock,  and  those  on  the  credit  side  are  used 
at  the  time  of  transferring  the  stock. 


CASH  BOOK 


Aug.   1,   19- 


Aug.  1,  19- 


r 

=£= 

19- 

Aug. 

1 

I.  O.  Chapman  in  full  100  shares 

10,000 

Aug. 

1 

125 

2 

15,000 

Wood,  7.00  ;  Coal,  15.00 

22 

3 

7,500 

2 

12,500 

4 

L.  M.  Goodyear     "         50     "        

5,000 

Steam  Engines,  raw  material,  Inv.  240 

15,000 

S 

H.  B.  Burton         "         25     "        

2,500 

R 

4,350 

500 
750 

10 

Steam  Engines  closed  out 

Machinery  and  Tools  closed  out — ... 

22,900 
13,900 

10 

"      "     "     O.C.Campbell 

30 

Franchise,  W.  S.  Hull   in  full  220  shrs. 
J.  B.  Coon        "      210     " 
W.  B.  Brown    "      100     " 
R.D.Munn       "       100      " 

11,000 
10,500 
5,000 
5,000 

"      "     "      W.D.Hampton 

"      "     "     L.  M.  Goodyear 

"      "     "      H.  B.  Burton 

375 
250 
125 

Entry  for  Closing;  the  Business 

H.  B.  Burton    "        80      " 

4,000 

30 

Ca  pital  Stock,  I.  O.  Chapman 

11.200 

E.  B.  Reed       "      100     " 

4,750 

"           "       0.  C  Campbell 

"            "       W.D.Hampton 

16,800 
8,400 

"           "       L.  M.  Goodyear 

5,600 

"            "       H.  B.  Burton 

2,800 

/ 
CORPORATIONS  177 


f^f/eca      jt&ttiwa/ 


CERTIFICATE  CANCELED. 

DATE.  BY  WHOM  SURRENDERED.  Ledger  Folio         Mo-  of         No<  LEFT  WITH  THE  COMPANY  BY 

Cer.         Shares 
Gen.        Stock.     CancTd.      Sold. 

19 


)<Mnfl-64 


U/t/      SO         1Q.    X).    lQaffi/i6(U  5  J  £  S  1Q.     £ 


Stock  Ledger. — The  Stock  Ledger,  in  reality,  is  an  auxiliary  book  which  is  in  no  way  directly  connected 
with  the  principal  books  of  the  business.  It  should  contain  each  stockholder's  name  and  address,  a  full 
and  complete  record  of  all  the  stock  issued  and  transferred,  show  who  the  present  stockholders  are,  and  the 
number  and  par  value  of  shares  held  by  each. 

A  Stock  Ledger  that  has  debit  and  credit  money  columns  is  quite  suitable  for  those  companies  that 
have  a  limited  number  of  stockholders,  who  are  not  likely  to  dispose  of  their  stock.  If  the  money  columns 
are  used  and  transfers  of  stock  are  made  on  the  company's  book  before  the  subscribed  stock  has  been  paid 
in  full,  the  following  procedure  must  be  observed  :  Credit  the  stockholder  who  is  disposing  of  the  stock, 
for  the  actual  balance  due%on  the  stock  transferred,  and  debit  the  new  stockholder  who  received  the  stock 
for  the  same  amount.  When  the  stock  has  been  paid  up  in  full,  the  money  columns  should  be  in  balance, 
and  should  be  ruled  up,  as  they  are  never  used  thereafter  in  transferring  stock.  The  transfer  columns 
provide  for  the  transfers  without  any  amount  in  dollars  being  entered.  However,  these  money  columns 
may  be  brought  into  use  again  when  assessments  are  made,  if  it  is  desired  to  debit  each  stockholder  for 
the  amount  of  his  assessment,  and  credit  him  for  the  same  when  paid.  This  description  of  the  Stock 
Ledger  applies  directly  to  the  form  accompanying  this  article.  There  are  various  other  forms  and  customs 
used  in  keeping  the  Stock  Ledger,  but  the  main  value  of  the  book  is  in  avoiding  the  trouble  of  keeping 
separate  accounts  in  the  General  Ledger  for  stockholders  that  frequently  dispose  of  their  shares. 

Description  of  Stock  Ledger  Entries 

The  accounts  on  page  178  show  that  I.  0.  Chapman,  C.  C.  Campbell,  W.  D.  Hampton,  L.  M.  Goodyear, 
and  H.  B.  Burton  have  been  charged  with  the  amount  of  their  respective  subscriptions,  these  amounts  being 
posted  from  the  Stock  Journal. 

The  last  entry  in  each  account  on  page  179  shows  that  the  individual  stockholders  have  paid  for  the 
amount  of  stock  subscribed  as  per  the  accounts  on  page  .178. 

The  accounts  of  I.  0.  Chapman  and  W.  D.  Hampton  on  page  180  show  transfers  of  stock  to  G.  B.  Hess 
and  John  Mc  Kelvy. 

The  account  of  S.  L.  Osborn  on  page  180  shows  a  variety  of  debits  and  credits  which  are  self- 
explanatory. 

These  entries  are  given  merely  as  examples,  the  transactions  not  being  recorded  in  the  other  books. 


178 


CORPORATIONS 


STOCK  LEDGER 


<JS^.        (1/  .  ^y^z-m^i^^^az-M 


19- 


<5eAt. 


Stock 

Journal 

Folio 


Cer. 

No. 


Trans. 
No. 


No.  of 
Shares 
Issued 


IOO 


No.  of 
Shares 
Trans. 


TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


Oct     IOO     i-AcUe,^  o-l  $IOO   eac/ 


DEBIT  CREDIT 


10,000 


^  S.  S< 


iz--rr&?t.tt-e~ 


19- 


UeJxt. 


Stock 

Journal 

Folio 


Cer. 
No. 


Trans. 
No. 


No.  of 

Shares 
Issued 


No.  of 

Shares 
Trans. 


I50 


TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


9o~l     I50     i.'Lcci.e.i.  &l  $IOO   e«,c/ 


/5,000 


<=>^// .    ^^S^-t^-y^t-A^-c-o 


DATB 

Stock 

Journal 

Folio 

Cer. 

No. 

Trans. 
No. 

No.  of 
Shares 
Issued 

No.  of 
Shares 
Trans. 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 

DEBIT 

CREDIT 

iy- 

I 

/ 

3 

75 

^°-t      75      4&<*A,*A  <sl  $100   e,G,cJL 

7,500 

^Z^-       ^^SrC.       ZJs&l^)l-&£'%'---&<z4' 


Stock 

Cer. 

Trans. 

No.  of 

No.  of 

Journal 

Shares 

Shares 

Folio 

No. 

No. 

Issued 

Trans. 

I 

I 

4 

50 

- 

19- 


<3ejLt. 


TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


9o-i-      ^O      ^JLcuL^i.  al  $100   e«,e*£ 


5,000 


Z3&.    &.    ^La± 


Stock 

Journal 

Folio 


Cer. 
No. 


Trans. 
No. 


19- 


6^U. 


No.  of 

Shares 
Issued 


25 


No.  of 
Shares 
Trans. 


TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


tyo-4,      2{y       d£cU,eA,  al  $IOO   ccucA 


2,5°° 


CORPORATIONS 


179 


STOCK  LEDGER 


0.  SAa 


19- 


Oe.Lt. 


Stock 

Journal 

Folio 

Cer. 

No. 

Trans. 

No. 

No.  of 
Shares 
Issued 

No.  of 
Shares 
Trans. 

I 

C.  B. 

/ 

IOO 

IO 

9 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 

Jo-L     IOO     4-AcUeA.  v-l  $IOO   e^ucA 
Jrco,u,nve,nyt  <,n,  Lu,£t  co-i,  a^iLo-iAe,  d,io-cJc. 


10,000 


10,000 


S.   ^>    ^C 


Stock 

Cer. 

Trans. 

No.  of 

No.  of 

Journal 

Shares 

Shares 

Foiio 

No. 

No. 

Issued 

Trans. 

/ 

/ 
C.  B. 

2 

J5o 

IO 

9 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


i:> 


6efit. 


Jo-l      I50     d-Aa,le<L   ol    $IOO    e,acJL 
J<x.u.nve,n,t  in,  Lu-Ct  lo-i,  cuiLo-v-e,  ti-to-c-Jc 


15,000 


15,000 


Ss  .      ^^^ .    ^_Sci-^--^^v-c-o 


19- 


d°eft.t 


Stock 

Journal 

Folio 

Cer. 
No. 

Trans. 
No. 

No.  of 
Shares 
Issued 

No.  of 
Shares 
Trans. 

I 

IO 

I 

O.  B. 

9 

3 

75 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


9o-l      75      4,/a,£e£    0/  $IOO    e,GLc-L 
ja,u,nve.tvt  istc  lu.il  Lo-L  a.&o-v.e,  d^to-cft 


7,500 


7,500 


<=Z-'-        — /fC'-       ZZs<?-<>-££i^e^z,'L 


Stock 

Cer. 

Trans. 

No.  of 

No.  of 

Journal 

Shares 

Shares 

Folio 

No 

No. 

Issued 

Trans. 

I 

C.  B. 

4 

50 

IO 

9 

TO  WHOM  TRANSFERRED   AND   OTHER    EXPLANATIONS 


•13- 


Oe.Lt. 


(Jo-t      50      d.Acote,<L   ol    $IOO    e,cucJL 
sa  u,nve,rvt  trv  Lu-tc  lo-i,  cud-o-v-e,  d.Co-0-Jc, 


5,000 


5,000 


^.  j^  j^L^ 


1 

Stock 

Cer. 

Trans. 

No.  of 

No.  of 

Journal 

Shares 

Shares 

Folio 

No. 

No. 

Issued 

Trans. 

/ 

C.  B. 

5 

25 

IO 

9 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 

Jo. I      25      d-JLcotci,   ol  Si OO    e-cccfL. 

jrcLi^ni.e-tvt  i,n,  lu,£t  lo-i,  a,<Lo-v-e,  d-to-cJc. 


1,500 


2,500 


ISO 


CORPORATIONS 
STOCK  LEDGER 


*~$.      ^S.      ^~*y*jLd* 


19- 


Stock 

Journal 

Folio 

Cer 
No. 

Trans. 
No. 

No.  of 

Shares 
Issued 

No.  of 
Shares 
Trans. 

/ 

I 
C.  B. 

2 

!5o 

5 

IO 

9 

S.  J. 

JO 

i 

6 

*45 

5 

TO  WHOM  TRANSFERRED   AND   OTHER  EXPLANATIONS 


<&r6i  -/So  dnaitd  o/  J/OO  €<ic/i 
<&/ay.m€4i/ in  AtlAAo4  Ate  "Ao'vc  dfoc/t 


tant/tMtd '  /a 


>UM 


15,000 


I5POO 


rjT \^.  ^ 


■e«s£t£ 


19- 


^/ 


IO 


Stock 

Journal 

Folio 


Cer. 
No. 


Trans. 
No. 


No.  of 
Shares 
Issued 


No.  of 
Shares 
Trans. 


5 


TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


CVlanjAcUcd '  Aom    (Q.     TQ.     (Qatn/ivcAA 


^f-        <=>*£/.      ^ZScAt^-^^AAo^t' 


DATE 

Stock 

Journal 

Folio 

Cer. 
No. 

Trans. 
No. 

No.  of 
Shares 
Issued 

No.  of 
Shares 
Trans. 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 

DEBIT 

CREDIT 

19- 



^/ 

I 

IO 

20 

C.  B. 

9 

3 

8 

75 

5 

€$01  p<5  dftaitA  oAJ/oo  eacA 
(Qfaumtnf t/i  Au/fAol  /Ae  avaue  t/oc/i 

7500 

7,500 

■e--i-z^^- 


DATE 

Stock 

Journal 

Folio 

Cer. 

No. 

Trans. 
No. 

No.  of 

Shares 
Issued 

No.  of 
Shares 
Trans. 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 

DEBIT 

CREDIT 

19- 

4Bty/ 

20 

/ 

8 

5 

<G?4aM<iAe44€d ' Aom  'Vr.    W<  (QZ%a'm/i/o<n    ' 

&*<J 

*Ss.    <^^T  (jy&-6& 


G^LfZ, 


19- 


Uv. 


Stock 

Journal 

Folio 

Cer. 

No. 

Trans. 
No. 

No.  of 
Shares 
Issued 

No.  of 
Shares 
Trans. 

I 

C.  B. 

5 

IO 

I 

9 

S.  J. 

20 

/ 

7 

IO 

/ 

8 

IO 

*S 

/ 

9 

20 

TO  WHOM  TRANSFERRED  AND  OTHER  EXPLANATIONS 


%4  SO  d/a4e<i  o/d/00  tam 

74.  Aoi  So ^t€4  -cen/.  <m  aAow  d/oca 

14.   Ay  /iandAe4  ■o/  J  malt  A  Ao  ©v.    *£%>. 


(Qy4-  AaMMte  #n  Jo  4na4e<)  oAd/ocA 
^>i  $0  dfiaUt  c^yarAeitea' t/vtrt  a/ Soft) 


1,000 


5°0 

as*/ 


500 
500 


CORPORATIONS 


181 


BALANCE   SHEET  OF  THE   UNION   IRON  WORKS,  DEC.  31,  19- 


Capital  Stock 

Cash 

Machinery  and  Tools 

Steam  Engines 

Expense 

RESOURCES 

Cash 

Machinery  and  Tools 

Company's  Present  Worth 

GAINS 

Steam  Engines 

LOSSES 

Machinery  and  Tools 

Expense 

Company's  Net  Cain , 

UNION  IRON  WORKS 

Capital  Stock  paid  up 

Net  Gain 

Company's  Present  Worth , 


6  2 
1  2 
1  9 


9  4 


3  0 
1  2 


4  0 
3 


9  0  0 

5  0  0 

3  5  0 

1  5  0 


9  0  0 


9  0  0 
3  0  0 


2  0  0 
1  5  0 


0  0  0 
2  0  0 


4  0 
3  2 


9  4 


4  3 

4  3 


4  3 


4-  3 


0  0  0 
0  0  0 

9  0  0 


9  0  0 


2  0  0 


2  0  0 


5  5  0 


3  5  0 


a  o  o 


2  0  0 


2  0  0 


CLOSING   CORPORATION   BOOKS 

The  method  of  closing  corporation  books  varies  with  circumstances.  The  directors  may  prefer  a  par- 
ticular form  in  closing,  or  some  special  form  may  be  required  by  the  by-laws  of  the  company. 

In  any  case,  it  is  necessary  to  close  all  accounts  that  show  a  profit  or  loss,  to  the  Loss  and  Gain  account. 
This  is  done  by  Journal  entries,  as  it  is  especially  desirable  in  corporation  bookkeeping  that  all  entries 
appear  in  the  Journal  with  full  and  complete  explanation.      See  the  following  journal  entries: 

CLOSING   ENTRIES 

Steam  Engines $3, 550 

Expense \ $    150 

Machinery  and  Tools 200 

Loss  and  Gain 3,200 

Entry  necessary  for  closing  the  loss  and  gain  accounts  as  per 
Statement,  Dec.  31,  19-. 

CLOSING  LOSS  AND  GAIN  ACCOUNT 

Conditions. —  Capital  stock,  $40,000.  Net  gain,  $3,200,  which  is  disposed  of  by  declaring  a  dividend 
of  5%  on  the  Capital  Stock  and  transferring  the  balance  to  the  credit  of  a  Surplus  Fund  account. 

Close  the  Loss  and  Gain  account  by  making  either  of  the  following  journal  entries.  We  prefer  the 
first  one. 

Entry  No.  1 

Loss  and  Gain $3,200 

Dividend  No.  1 $2,000 

Surplus  Fund 1,200 

For  the  amount  of  the  first  dividend  of  5%  declared  on  the 
Capital  Stock,  and  the  remainder  of  the  gain,  which  remains  undi- 
vided and  is  transferred  to  a  Surplus  Fund  account  on  closing  the 
books,  Dec.  31,  19-. 

Entry  No.  2 
Loss  and  Gain $2,000 

Dividend  No.  1 $2,000 

For  the  amount  of  first  dividend  of  5  %  declared  on  the  Capital 
Stock,  Dec.  31,  19-. 

Loss  and  Gain $1 ,200 

Surplus  Fund $1,200 

For  amount  of  undivided  gain  on  closing  the  books,  Dec.  31, 1 9-, 


182 


CORPORATIONS 


Dividends. —  Before  paying  the  stockholders  their  dividends,  observe  the  directions  given  for  the  use 
of  the  Dividend  Receipt  Book.  As  each  stockholder  is  paid  his  dividend,  make  the  required  entry  in  the 
Cash  Book.  For  example  :  If  I.  O.  Chapman  holds  100  shares  and  receives  a  dividend  of  5%,  an  entry 
should  be  made  on  the  credit  side  of  the  Cash  Book  as  follows  :  "  Div.  No.  1,  I.  0.  Chapman,  $500."  In 
posting  these  payments  to  the  Dividend  account,  enter  the  respective  stockholders'  names  in  the  explanation 
column.     See  the  following  Dividend  account : 


wttdmd    ©W. 


y 


19 
Jan. 


I.  O.  Chapman 
C.  C.  Campbell 
W.  D.  Hampton 
L.  M.  Goodyear 
H.  B.  Burton 


1 

500 
750 
375 
250 
125 

19 
Dec. 

31 

000 


19 
Dec. 

1 

31 

200 


DIVIDEND  RECEIPT  BOOK 


cJjiapLcl&rLcl   /to*.    J   &l   £j    Lj      J) e,€A,cul€scL   JJe^c.     ?/,    I O 


Check 
JSo. 


Name  op  Stockholders. 


No.  of 
Shares. 


Am'tof 
Dividend. 


6      @P.    0.    ^da/iman  /OO        600 


/ 

f 

JO 


eg 


7-.    (@70oe/u*ai 


S60 
60 


f60 
MO 


Date  of  Pay- 
ment. 


Signatures  op  Stockholders. 


1!) 


1-1 


J 


<Wl      3. 


td  VU  €H€l 


35        </£5 


i/to 


Dividend  Receipt  Book. —  This  book  should  contain  full  and  complete  data  of  all  dividends  declared, 
giving  their  date,  the  dividend  number,  the  stockholders'  names,  the  number  of  shares  held  by  each,  the 
rate  per  cent  declared,  the  amount  of  the  dividend  in  dollars  declared  to  each  stockholder,  and  their 
signatures,  if  possible,  thus  securing  their  receipt  for  the  payment  of  such  dividends. 

In  case  you  are  unable  to  secure  the  signature  of  a  stockholder  on  this  book  at  the  time  of  paying  his 
dividend,  remit  him  a  check  payable  to  his  order,  as  it  will  necessitate  his  indorsement,  which  will  serve  as 
a  receipt.  In  the  absence  of  a  stockholder's  signature  on  the  Dividend  Receipt  Book,  write  in  the  space 
designated  for  his  name,  "Paid  by  Check  No. — ,"  giving  its  date,  etc. 

This  book,  like  many  others  used  in  bookkeeping,  is  not  absolutely  necessary;  but  its  use  obviates  the 
necessity  of  depending  upon  receipts,  cashed  checks,  or  other  scraps  of  evidence  concerning  the  dividends 
that  may  have  been  paid  long  ago.  The  use  of  this  book  will  be  apparent  if  you  consider  the  advantage 
of  having,  at  any  time,  immediate  access  to  the  record  of  all  dividends  declared. 

There  are  many  well-regulated  companies  that  pay  all  dividends  by  issuing  to  the  stockholders  a 
"Dividend  Check,"  which  is  used  for  this  special  purpose  only.  This  method  is  a  very  good  one,  even  with 
the  use  of  the  Dividend  Receipt  Book,  and  especially  so  in  its  absence. 


CORPORATIONS 


183 


The  Installment  Book. —  This  is  a  book  to  be  used  when  the  subscribed  stock   is   to  be  paid  in 

installments,  and  usually  at  certain  regular  periods,   as  may  be  provided  by  the  by-laws. 

The  form  of  the  Installment  Book  herewith  given  is  the  one  ordinarily  used  and  requires  no  further 
description. 

A  few  days  before  the  maturity  of  an  installment,  it  is  usual  for  the  bookkeeper  to  fill  out  a  sufficient 
number  of  pages  for  the  whole  number  of  stockholders  who  have  installments  to  pay,  together  with 
the  number  of  shares,  etc. ,  of  each.  This  will  make  less  work  when  the  individual  stockholders  call  to  pay 
their  installments. 

When  stock  is  paid  by  installments,  the  Transfer  Book  is  usually  closed  against  the  transfers  of  stock 
for  five  or  ten  days  before  the  installment  is  due,  the  same  as  in  case  of  an  assessment  or  the  paying  of 
a  dividend.  A  stockholder  is  not  allowed  to  make  a  transfer  of  his  stock  on  the  company')?  books  until  all 
delinquent  installments  on  his  stock  have  been  paid. 


^_^^ds£tz-&rrv'e>iisC      ^^^s-CL-e-tt- 


Installment  No.  /,        of  5(^°l°       Acct.  Due         <wc  d&wtcwvctj  ihsJL.  /j  19 
Par  Value  %iOO.  per  share. 


Stock 
Ledger 
Page. 


stockholder's  namb 


Cer. 
No. 


No.  Share    Amount  in  Dollars     Date  of  Payment 


A  W.  %M     6  loo  5,000 

-&.  -4.  6tu,cut  j  loo  5,000 

J.  P.  6Acuu+     8  loo  5,000 

%    ^/.    )fale4,       Cj  ^O     %,500 

#1.  J$.  j3ua£<m/o  50  2L500 


lit 


J<e,<L.      I    sclaa£  &W  -(ouAAsWVCM 


3 


.(( 


<f 


Paid  &u,  <Joe^A gtj.Cj 

657 


CHANGING  PARTNERSHIP  BOOKS  TO  CORPORATION  BOOKS 

A  partnership  firm  which  has  been  conducting  a  Clock  Manufacturing  business,  under  the  firm  name  of 
Burton,  Clark  &  Co.,  wishes  to  incorporate  upon  a  basis  of  $80,000  Capital  Stock,  divided  into  800  shares 
at  a  par  value  of  $100  each;  the  corporate  name  is  "The  American  Clock  Company." 

The  above  firm  consists  of  three  partners,  whose  combined  capital,  or  present  worth,  at  this  closing  of 
the  partnership  books  is  $53,642.00,  of  which  H.  B.  Burton's  net  Stock  account  is  $31,119.80,  W.  Clark's 
net  Stock  account  is  $10,347.35,  and  W.  W.   Ely's  net  Stock  account  is  $12,175.45. 

The  three  original  partners  have  agreed  to  take  stock  at  par  value  in  the  new  company  for  their  present 
worth  in  the  old  firm,  as  follows:  H.  B.  Burton  is  to  receive  310  shares  of  stock,  and  a  personal  credit  on 
the  books  of  the  new  company  of  $119.80;  W.  Clark,  100  shares,  and  a  personal  credit  of  $347.35;  W.  W. 
Ely,  120  shares,   and  a  personal  credit  of  $175.45;  leaving  270  shares  unsubscribed  for. 

As  the  law  usually  requires  that  each  and  every  corporation  shall  be  organized  with  not  less  than  five 
stockholders,  others  were  induced  to  subscribe  for  stock,  as  follows:  Gr.  E.  Daley,  200  shares  at  a  par  value 
of  $100;  A.  B.  Crook,  30  shares  at  a  par  value  of  $100;  the  40  remaining  shares  to  be  held  as  Treasury 
Stock. 


184  CORPORATIONS 

Some  firms  in  changing  their  business  to  a  corporation,  desire  to  have  the  old  partnership  books  con- 
tain entries  and  explanations  necessary  to  produce  the  change,  and  show  the  financial  condition  of  the  old 
firm.  While  this  is  not  absolutely  necessary,  it  is  an  excellent  plan,  as  it  closes  all  accounts  on  the  books 
of  the  old  company,  and  shows  that  all  balances  have  been  transferred  to  the  books  of  the  new  corporation 
This  is  done  by  first  debiting  the  newly  formed  corporation  and  crediting  all  the  resources,  and  then 
crediting  the  corporation  and  debiting  all  the  liabilities,  as  in  the  following  journal  entries: 

The  following  entries  are  made  in  the  Journal  of  the  old  company,   and  posted  to  the  eld  Ledger 
The  first  one  shows  that  all  the  resource  accounts  have  been  balanced  and  transferred  to  the  new  company 
and  the  second  shows  that  the  new  company  has  assumed  all  the  liabilities  of  the  old  firm,  including  the 
partners'  accounts. 

The  American  Clock  Co $104,602  10 

Merchandise $51,375  40 

N.V.Taylor 10,100  60 

M.  J.  Quinn 8,023  00 

Bills  Receivable 9,242  50 

Chattels 680  00 

Cash 18,780  60 

Mortgages  Receivable 6,400  00 

Entry  necessary  for  closing  all  resource  accounts  belong- 
ing to  the  partnership  firm  of  Burton,  Clark  &  Co.,  and 
charging  the  same  to  the  new  company,  incorporated  und'Jr 
the  name  of  The  American  Clock  Co. 

Bills  Payable $22,394  00 

A.  G.  Davis ' 20,505  10 

J.  B.  Loomis 8,060  40 

H.  B.  Burton,  Stock  account 31,119  80 

W.  Clark,  Stock  account 10,347  35 

W.  W.  Ely,  Stock  account 12,175  45 

The  American  Clock  Co $104,602  10 

Entry  necessary   for  transferring  the  partners'  accounts 
and  all  liability  accounts  of  the  firm  of  Burton,  Clark  &  Co., 
to  the  corporation  of   The  American  Clock  Co. 
The  journal  entry  necessary  for  opening  the  books  of  the  American  Clock  Co.  is  as  follows  : 

Subscription  (for  all  stock  subscribed) $76, 000  00 

Treasury  Stock 4,000  00 

Merchandise 51,375  40 

N.  V.  Taylor 10,100  60 

M.  J.  Quinn 8,023  00 

Bills  Receivable 9,242  50 

Chattels 680  00 

Mortgages  Receivable 6, 400  00 

Cash 18,780  60 

Capital  Stock $80,000  00 

Bills  Payable 22,394  00 

A.  G.  Davis 20,505  10 

J.  B.  Loomis 8,060  40 

H.  B.  Burton,  credit  for  balance  of  old  Stock  account..  119  80 

W.  Clark,  credit  for  balance  of  old  Stock  account 347  35 

W.  W.  Ely,  credit  for  balance  of  old  Stock  account. ...  175  45 

Subscription  (credit  for  amount  paid  in) 53,000  00 

For  the  nominal  amount  of  stock  of  the  American  Clock 
Co.,  incorporated  on  a  basis  of  $80,000  Capital  Stock, 
divided  into  800  shares  at  a  par  value  of  $100  each,  of 
which  40  shares  are  to  remain  on  the  company's  books  as 
Treasury  Stock  until  sold.  The  remaining  760  shares  have 
been  issued  to  the  incorporators  and  associates  as  follows: 


CORPORATIONS  185 

H.  B.  Burton,  310  shares  paid  up $31,000 

W.  Clark,  100  shares  paid  up 10,000 

W.  W.  Ely,  120  shares  paid  up , . . . .     12,000 

A.  B.  Crook,  30  shares  not  paid  up. 
G.  E.  Daley,  200  shares  not  paid  up. 

As  the  Subscription  account  now  stands  on  the  books,  it  has  an  excess  debit  of  $23,000.  This  account 
will  be  balanced  by  a  credit  from  the  Cash  Book  when  G.  E.  Daley  and  A.  B.  Crook  pay  for  their  stock. 

The  Treasury  Stock  account  has  a  debit  of  $4,000.  which  will  be  credited,  and  Subscription  account 
debited  for  all  subsequent  subscriptions.  When  the  full  amount  of  the  company's  stock  has  been  sub- 
scribed, the  Treasury  Stock  account  will  balance,  and  when  the  same  has  been  paid,  the  credit  side  of  the 
Subscription  account  will  show  the  amount  oi  paid-up  capital. 

Borrowing  Money  to  Pay  Dividends. —  It  very  often  occurs  that  the  cash  capital  of  a  company  is 
invested  in  the  business,  and  that  although  the  profits  of  the  concern  are  sufficient  to  justify  declaring  a 
dividend,  there  is  not  a  sufficient  amount  of  available  cash  to  pay  the  dividend.  Under  such  circumstances 
the  company  may  be  justified  in  borrowing  enough  cash  to  declare  the  required  dividend.  The  entry 
required  will  depend  upon  circumstances.  Usually  a  note  is  given  and  the  entry  is  "Cash  to  Bills 
Payable."  When  the  stockholder  receives  a  dividend,  credit  Cash  and  debit  "Dividend  No. — ."  The 
Dividend  account  will  then  stand  open  until  the  loss  and  gain  of  the  business  is  adjusted,  at  which  time  it 
should  .be  credited  for  the  amount  of  the  dividend  paid,   thus  balancing  the  account. 

Stock  Sold  at  a  Discount. —  When  Treasury  Stock  or  any  other  kind  of  stock  is  sold  at  a  discount, 
it  should  be  entered  the  same  as  directed  on  page  175,  except  that  Subscription  is  to  be  debited  and  not 
Franchise. 

And  when  stock  of  an}*  description  is  issued  as  "Preferred  Stock,"  it  should  have  written  upon  the 
face  of  it,  "Preferred  at  10  per  cent,  H.  B.  Burton,  Secretary,  I.  O.  Chapman,  President."  However, 
Preferred  Stock  Certificates  are  usually  printed  for  that  particular  purpose,  providing  for  the  rate  of  divi- 
dend, etc. 

The  Stock  Ledger  should  show  who  are  the  holders  of  preferred  stock,  the  record  being  made  in  the 
explanation  column.  See  last  entry  in  S.  L.  Osborn's  account  on  page  180.  Most  corporation  bookkeepers 
employ  some  method  of  their  own  which  they  find  more  convenient  for  this  purpose  than  the  Stock  Ledger. 

Treasury  Stock  Given  in  Exchange  for  Merchandise When  Treasury  Stock  is  sold  at  a  premium 

and  paid  for  in  merchandise,   the  following  entries  should  be  made  in  the  Journal: 

Merchandise $2,200 

Treasury  Stock t $2,000 

Stock  Premium  and  Discount 200 

For  20  shares  of  Treasury  Stock  at  par  value,  sold  at  a  pre- 
mium of  10  per  cent,  in  favor  of  S.  L.  Osborn,  for  merchandise  as 
per  Inv.  No. — . 

Crediting  Dividends. —  When  stockholders  have  not  paid  in  full  for  their  stock,  a  dividend  is  some- 
times declared,  and  the  amount  they  would  have  received  if  their  stock  had  been  paid  for  is  placed  to  their 
credit  as  a  payment  on  their  stock.     The  entry  in  such  cases  is  made  as  in  the  accompanying  form. 

The  amounts  of  the  entry  are  posted  to  the  Dividend  and  Subscription  accounts  in  the  General  Ledger 
and  the  amounts  in  the  explanation,  to  the  respective  accounts  of  the  stockholders  in  the  Stock  Ledger. 

Dividend  No.  — $600 

Subscription $600 

For  amount  of  dividend  due  A.  B.  Crook  and  G.  E.  Daley,  which 

is  placed  to  their  credit  in  the   Stock    Ledger  as  follows: 

A.  B.  Crook $300 

G.  E.  Daley 300 

Assessment  Book — This  book  is  used  for  keeping  a  record  of  assessments,  which  are  collections 
made  from  the  stockholders  in  payment  of  their  stock,  or  assessments  may  be  made  after  the  original  stock 
subscriptions  Lave  been  paid,  and  for  certain  special  purposes,  as  the  paying  of  operating  expenses,  or  the 
discharge  of  corporation  indebtedness.  The  Assessment  Book  is  not  required  until  after  the  corporation  is 
in  full  operation.  If  the  stock  is  not  to  be  paid  for  by  assessments,  it  will  not  be  required  at  all,  unless 
additional  funds  are  to  be  raised  in  excess  of  the  paid-up  capital.  When  an  assessment  is  made  public 
xiotice  through  a  newspaper  is  usually  given.     The  following  is  a  usual  form  : 


186 


CORPORATIONS 


ASSESSflENT    NOTICE 

Cincinnati,  0.,  Feb.  1,  19- 
Notice  is  hereby  given  to  the  stockholders  of  the  American  Clock  Co.  that  at  a  meeting  of  the  Board 
of  Directors  held  upon  the  above  date,  an  assessment  (No.  1)  of  Ave   per  cent   was  levied  on  the  capital 
stock  of   the  corporation,  payable  on  or  within  thirty  days  after  date  to  the  secretary  at  the  office  of  the 
company  in  Cincinnati,  Hamilton  Co.,  O. 

Any  stock  upon  which  said  assessment  shall  remain  unpaid  on  the  10th  day  of  March.  19-,     shall  be 
deemed  delinquent,  and  will  be  duly  advertised  for  sale  at  public  auction,  and  unless  payment  be  made 
before,  will  be  sold  on  Tuesday,  the  1st  day  of  April,  19-,     to  pay  the  delinquent  assessment  thereon, 
together  with  the  costs  of  advertising  and  the  expenses  of  the  sale. 
By  order  of  the  Board  of  Directors. 

»    H.  B.  Burton,  Secretary. 


©wd&umen/    Cwim 


Date  Delinquent   }/^ie/   JO,    JSL  Date  of  Sale   dj^iU  /,    J  9- 

Assessment  No.   /  of   C  per  cent.  Levied    J&&.    /,    J9_ 


o 


Stockholder's  Name. 


No.         No.  .  .  .p.  cr       Date  of  Pay- 

Cer.      Shares.       Amount  Due.  -  ment> 


Remarks. 


J4.    Jo.    Jdu>tt<^n, 

y.  -4ui 


22  pa    jj55o 
^3  l0c      5°° 

24  J  20       600 

25  30  J50 

26  200  JOO 

DISSOLUTION   OF   CORPORATIONS 


'9 


A  number  of  conditions  may  occasion  the  dissolution  of  corporations.  They  may  be  dissolved  through 
the  expiration  of  the  time  for  which  the  charter  was  granted,  they  may  voluntarily  surrender  their  charters, 
or  they  may  become  insolvent.  In  the  latter  case,  the  adjusting  of  the  company's  affairs  will  be  effected  by 
a  receiver.  See  " Dissolution,"  page  .160.  In  the  former  cases,  it  is  customary,  previous  to  dissolution, 
to  convert  the  entire  assets  of  the  company  into  cash,  to  liquidate  all  outstanding  debts,  and  then  to  devote 
the  cash  that  may  remain  to  buying  up  the  capital  stock  either  at  a  premium  or  at  a  discount,  according  to 
the  amount  of  funds  on  hand. 

In  doing  this,  entries  should  be  made  closing  every  account  in  the  Ledger.  The  following  entries 
and  suggestions  are  given  upon  the  supposition  that  the  business  has  been  reduced  to  a  cash  basis.  If  the 
stockholders  have  paid  in  full  for  their  stock,  it  would  only  be  necessary  to  close  the  accounts  showing  a 
loss  or  a  gain  to  the  Loss  and  Gain  account  and  then  close  the  Loss  and  Gain  account  and  the  Surplus  Fund 
accounts  to  the  Capital  Stock  account.  Then  debit  the  Capital  Stock  account  in  the  Cash  Book,  paying  eacb 
stockholder  in  proportion  to  the  amount  of  stock  owned.  The  following  cash  book  entry,  if  properly 
made,  will  balance  the  Cash  Book  and  Capital  Stock  account: 


CORPORATIONS  187 

Capital  Stock,  I.  0.  Chapman $11,200 

"          "       C.C.Campbell 16,800 

«           "       W.D.Hampton 8,400 

"           "       L.  M.  Goodyear 5,600 

"           "       H.  B.  Burton 2,800 

If  the  stockholders  have  not  paid  in  full  for  their  stock,  it  would  be  necessary  after  closing  the  Loss 
and  Gain  and  Surplus  Fund  accounts  to  the  Capital  Stock  account,  to  debit  Capital  Stock  and  credit  each 
stockholder  by  journal  entry  for  the  amount  unpaid  on  his  stock,  provided  the  individual  stockholders 
were  debited  on  the  General  Ledger  for  the  amount  of  their  subscription. 

Capital  Stock $19,400 

I.  O.  Chapman $4,850 

C.  C.  Campbell 4,850 

W.  D.  Hampton 4,850 

L.  M.  Goodyear 2,425 

H.  B.  Burton '. 2,425 

Entry  necessary  for  dissolution  of  business. 

After  making  the  following  entry,  debit  the  Capital  Stock  account  in  the  Cash  Book  for  the  balance  of 
cash  on  hand,  paying  the  same  to  the  stockholders  as  previously  illustrated. 

Surrendering  Stock. —  In  all  cases  where  stockholders  surrender  their  stock  in  favor  of  the  company 
at  the  time  of  closing  out  the  business,  it  should  bear  the  following  indorsement: 

"Surrendered  to  the  company  Oct.  10,  19-.       I.  O.  Chapman." 

Transferring  Stock. —  All  stock  sold  by  the  stockholders  must  be  properly  transferred  on  the 
company's  books.  When  a  Stock  Journal  is  used,  all  such  transfers  of  stock  should  first  be  entered  in  the 
Stock  Journal  and  then  posted  to  the  Stock  Ledger. 

When  a  stockholder  sells  all  his  stock,  the  old  certificate  of  stock  should  be  taken  up  by  the  company 
and  a  new  one  issued  to  the  stockholder.  If  only  a  part  of  the  stock  is  sold,  then  two  certificates  of  stock 
should  be  issued,  one  to  the  new  stockholder  for  the  amount  of  stock  bought,  and  one  to  the  old  stockholder 
for  the  remainder  of  stock  unsold.  The  old  certificates  should  then  be  canceled.  See  "Canceled  Stock" 
following  this  subject 

Certificates  ot  Stock  in  a  Corporation  or  Installment  Scrip  may  be  transferred  at  any  time  by  the  holder 
thereof,  or  by  his  attorney  if  legally  authorized  to  do  so,  or  by  indorsement  of  the  Certificate  or  Installment 
Scrip  and  the  acknowledgment  of  such  transfer  on  the  books  of  the  corporation. 

No  surrendered  Certificate  or  Installment  Scrip  shall  be  canceled  by  the  secretary  before  a  new  one  is 
Issued  in  lieu  thereof  ;  and  the  Certificate  or  Installment  Scrip  so  canceled  will  serve  as  a  voucher  of  the 
transfer.  If,  however,  a  Certificate  of  Stock  or  Installment  Scrip  should  be  lost  or  destroyed,  the  Board  of 
Directors  may  order  a  new  one  issued  upon  such  guarantees  as  they  may  deem  satisfactory. 

Canceled  Stock. —  When  stock  is  transferred  or.  the  company's  books,  the  old  certificate  should  be 
canceled  by  the  party  selling  the  stock,  as  follows  : 

" Transferred  to  G.  B.  Hess, ,  19-.      C.  C.  Campbell." 

The  above  indorsement  should  be  used  when  all  of  the  stock  is  sold,  and  the  following  indorsement 
when  only  a  part  of  it  is  sold. 

"Transferred  ten  shares  of  the  within  stock  to  G.  B.  Hess, ,  19-.       C.  C.  Campbell." 

HOW  TO  CHANGE  A  CORPORATION  TO  A  SINGLE  PROPRIETORSHIP 

It  is  sometimes  desirable  that  the  stock  and  property  of  a  corporation  pass  under  the  control  of  some 
individual  stockholder,  and  that  the  corporation  thereby  go  out  of  existence.  This  must  be  accomplished 
by  the  legal  purchase  of  all  the  stock  by  the  individual  stockholder.  It  may  happen  that  the  stockholders 
are  widely  scattered,  and  that  they  are  not  personally  known  to  the  stockholder  who  wishes  to  purchase  the 
stock,  and  their  addresses  may  also  be  unknown.  In  order  that  the  stockholder  (who  probably  already 
holds  a  majority  of  the  stock)  may  legally  get  possession  of  the  remainder,  an  assessment  is  usually  made 
for  some  nominal  purpose.  If  any  stockholder  faijs  to  pay  this  assessment,  his  stock  is  advertised  for  sale, 
to  pay  such  assessment,  and  if  the  same  is  not  paid,  it  is  bought  at  public  auction  by  the  stockholder  who 
m  trying  to  get  control  of  th*  stock.     Of  course,  if  any  stockholder  wishes,  he  may  pay  his  assessments. 


188 


CORPORATIONS 


and  in  this  manner  retain  possession  of  his  stock,  but  in  most  cases,  under  the  conditions  we  have  described, 
the  minor  stockholders  would  not  hold  out  against  the  majority  stockholder,  and  would  either  part  with 
their  stock  upon  terms  mutually  satisfactory,  or  allow  it  to  be  sold  to  pay  the  delinquent  assessments. 
When  the  stockholder  who  wishes  to  get  control  of  the  corporation  property  gains  legal  possession  of 
all  the  stock,  he  may  then  represent  the  facts  to  a  competent  court,  and  secure  a  judicial  order  dissolving 
the  corporation.  When  this  order  is  granted,  the  stockholder  will  secure  legal  ownership  of  all  the  corpora- 
tion property. 

Appropriation  of  Surplus  Fund — When  it  is  desired  to  appropriate  a  part  of  the  Surplus  Fund 
to  the  payment  of  the  unpaid  capital  due  the  company  from  the  stockholders,  you  should  make  the  follow- 
ing journal  entry. 


Surplus  Fund 

I.  0.  Chapman,  100  shares $200 

C.  C.  Campbell,  100  shares , 200 

W.  D.  Hampton,  100  shares 200 

L.  M.  Goodyear,  50  shares 100 

H.  B.  Burton,  50  shares . .  100 


For  $800  of  the  Surplus  fund  which  has  been  appro- 
priated to  the  discharging  of  the  unpaid  capital,  accord- 
ing to  order  of  the  directors. 

These  entries  should  be  posted  to  the  credit  side  of  the  respective  stockholders'  accounts  in  the  Stock 
Ledger. 

Entries  of  the  above  character  occur  only  when  there  are  delinquent  payments  on  the  stock,  and  a 
credit  balance  in  the  Surplus  Fund  account,  which  the  directors  desire  to  use  in  discharging  this  delinquency 
On  the  stock,  by  appropriating  a  certain  percentage  of  it  for  that  purpose. 


BALANCE  SHEET  OF  THE  UNION  IRON  WORKS,  JAN.  i,  19 


Capital  Stock ...   

Cash 

Machinery  and  Tools 

Steam  Engines 

Expense 

Surplus  Fund 

RESOURCES 

Cash 

Steam  Engines,  Inv'ry 

Machinery  and  Tools 

Company's  Present  Worth 

GAINS 

Steam  Engines 

LOSSES 

Machinery  and  Tools , 

Expense 

Company's  Net  Gain 

UNION  IRON  WORKS 

Capital  Stock  paid  up 

Surplus  Fund 

Net  Gain 

Company's  Present  Worth 

Loss  and  Gain 

Surplus  Fund 

Capital  Stock 

Entries  preparatory  to  dissolution  of  business 


4  6 
1  4 
1  4 


74 


3  0 

1 

1  4 


4  0 
1 
4 


4  0  0 

10  0 

10  0 

19  0 


7  9  0 


3  10 

7  5  0 
0  0  0 


1  0  0 
1  9  0 


0  0  0 
2  0  0 
8  6  0 


7  4  0 
0  6  0 


4  0 
1  6 

1  7 

1 

7  4 


4  6 


4  6 


4  6 

4  6 


0  0  0 
0  9  0 

5  0  0 

2  00 


7  9  0 


0  6  0 


0  6  0 


1  5  0 


2  9  0 


8  6  0 


0  6  0 


0  6  0 


8  0  0 


ORGANIZATION  OF  CORPORATIONS 


CORPORATION  NO.  1 

Conditions:  Capital  Stock  $40,000,  divided  into  400  shares  at  a  par  value  of  $100  each,  which  are 
divided  among  the  incorporators  and  paid  for  in  full  on  commencing  business. 

Steps  for  Organizing. 

1.  Look  up  the  State  law  thoroughly  on  the  subject  of  corporations. 

2.  Secure  a  charter. 

3.  Have  each  stockholder  inscribe  his  name  on  the  Stock  Subscription  Book  for  the  amount  of  stock 
subscribed. 

4.  Open  the  books,  using  Opening  Entry  No.  1.  If  it  is  not  desired  to  debit  the  stockholders  in  the 
General  Ledger  for  the  amount  of  their  subscriptions,  use  any  one  of  the  Opening  Entries  from  No.  2 
to  No.  7. 

5.  Make  out  a  certificate  of  stock  for  the  various  stockholders,  and  enter  the  same  into  the  Stock  Journal. 
Then  open  an  account  in  the  Stock  Ledger  with  each  stockholder  and  debit  him  by  posting  the  amount  of 
his  subscription  from  the  Stock  Journal. 

6.  Issue  the  certificates  of  stock  to  the  stockholders  and  collect  the  full  amount  of  their  subscriptions. 
If  Opening  Entry  No.  1  is  used  in  opening  the  books,  credit  each  of  the  stockholders  in  the  Cash  Book  foi 
the  payment,  and  post  the  same  to  the  credit  of  theu*  respective  accounts  in  the  General  Ledger;  also  credit 
them  in  the  Stock  Ledger. 

When  the  above  requirements  have  been  complied  with,  the  opening  of  the  books  will  have 
been  completed. 

CORPORATION   NO.  2 

Conditions:  Capital  Stock  $40,000,  divided  into  400  shares  at  a  par  value  of  $100  each,  which  are 
divided  among  the  incorporators  and  paid  for  by  such  installments  as  the  directors  may  see  fit  to  make. 

After  meeting  the  necessary  requirements  for  organizing  a  corporation  according  to  the  directions 
given  under  Corporation  No.  1,  have  each  stockholder  sign  the  Stock  Subscription  Book  for  the 
amount  of  stock  set  opposite  his  name. 

Open  the  books  by  debiting  Franchise  and  crediting  Capital  Stock  according  to  the  third  entry  on 
page  173. 

Charge  the  subscribers  for  their  respective  shares  of  stock  on  the  Stock  Journal,  which  must  be  posted  to 
the  Stock  Ledger.  Also  collect  25  per  cent  of  the  stock  issued,  and  enter  it  on  the  debit  side  of  the  Cash 
Book,  crediting  Franchise,  at  the  same  time  posting  it  to  the  credit  of  the  respective  stockholders'  accounts 
in  the  Stock  Ledger.  This  will  complete  the  opening  of  the  books,  leaving  everything  concerning  them  in  a 
proper  condition  for  receiving  the  regular  transactions  of  the  business. 

Installment  Account. —  When  stock  is  to  be  paid  for  by  installments,  an  Installment  Book  is  generally 
used.  When  this  book  is  not  used,  an  account  should  be  opened  with  each  installment  by  debiting  Install- 
ment and  crediting  Franchise.  When  a  payment  is  received,  Cash  is  debited  and  Installment  is  credited. 
The  Installment  account  will  always  show  the  amount  yet  unpaid  on  the  installment,  and  when  it  is  all 
paid,  the  account  will  balance. 

Some  companies  prefer  to  issue  Installment  Scrip  for  the  amount  of  each  installment  paid,  and  not  issue 
the  certificates  of  stock  until  the  subscription  has  been  paid  up  in  full.      See  "Installment  Scrip,"  page  164. 

CORPORATION   NO.  3 

Conditions:  Name,  "Fowler  Pump  Works;  fixed  capital  of  $150,000,  divided  into  1,000  shares  of 
Ordinary  Stock  at  a  par  value  of  $100  each,  and  500  shares  Preferred  Stock  of  $100  each,  with  a  stated 
dividend  of  10%  per  annum  on  the  Preferred  Stock.  The  Preferred  Stock  is  to  be  placed  to  the  credit  of  a 
Working  Capital  account,   as  per  the  following  entry: 

Franchise $150,000 

Capital  Stock $100,000 

Working  Capital 50,000 

For  the  nominal  Capital  Stock  of  the  Fowler  Pump  Works  incor- 
porated upon  the  basis  of  $150,000,  divided  into  1,000  ordinary 
shares  at  a  par  value  of  $100  each,  500  preferred  shares  of  $100 

[189] 


190  ORGANIZATION   OF  CORPORATIONS 

each  with  a  stated  dividend  of  10  per  cent,  per  annum.  The  1,000 
ordinary  shares  are  placed  to  the  credit  of  the  Capital  Stock,  and  the 
500  preferred  shares  are  placed  to  the  credit  of  a  Working  Capital 
account. 

SALE  OF  WORKING  CAPITAL 

Sold  at  Par. —  When  any  of  the  Working  Capital  is  sold  at  par  and  paid  for,  the  following  entries 
should  be  made  in  the  Journal  : 

Working  Capital $2,000 

Capital  Stock $2,000 

For  20  shares  of  Preferred  Stock  at  a  par  value  of  $100  each, 
issued  with  a  stated  dividend  of  10  per  cent,  in  favor  of  A.  D. 
Hunter. 

Cash $2,000 

Franchise $2,000 

For  payment  in  full  for  the  above  sale  of  stock. 

Sold  at  a  Discount. —  When  the  Working  Capital  is  sold  at  a  discount  and  is  to  be  paid  for  by 
installments,  the  first  installment  being  paid,  debit  "Working  Capital"  and  credit  "Capital  Stock"  for 
the  par  value  of  the  stock;  then  debit  "Cash"  for  the  amount  received  and  "Stock  Premium  and  Dis- 
count" for  the  amount  of  the  discount,   and  credit  "Franchise.''     See  the  following  entries: 

Working  Capital $1,000 

Capital  stock $1,000 

For  10  shares  of  Preferred  Stock  at  a  par  value  of  $100  each, 
with  a  stated  dividend  of  10  per  cent  ,  which  stock  has  been 
credited  by 'the  company  as  a  Working  Capital.  These  10  shares 
are  sold  at  a  discount  of  5%.  The  first  installment  of  75%  has 
been  paid  as  per  the  following  entry: 

Cash $250 

Stock  Premium  and  Discount $50 

Franchise $300 

For  explanation  see  the  above  entry. 

Sold  at  a  Premium. —  When  any  of  the  Working  Capital  is  sold  at  a  premium,  the  same  entries  are 
to  be  made  as  when  sold  at  a  discount,  except  that  "Stock  Premium  and  Discount"  is  to  be  credited. 

CORPORATION    NO.  4 

Conditions:  Name,  "West  Coast  Soap  Co.;"  Capital  Stock  $80,000,  divided  into  800  shares  at  a 
par  value  of  $100  each.  The  incorporators  contribute  the  property,  which  forms  the  resources  of  the 
company,  and  in  consideration  of  which  contribution,  divide  the  stock  among  themselves  according  to 
agreement. 

For  an  opening  entry  under  the  above  conditions  we  recommend  the  following,  or  a  similar  entry  : 

Plant $80,000 

Capital  Stock $80,000 

For  amount  of  Real  Estate,  Raw  Material,  Good  Will,  Chat- 
tels, etc. ,  which  forms  the  basis  of  the  West  Coast  Soap  Co. ,  organ- 
ized upon  the  basis  of  $80,000  Capital  Stock,  divided  into  800  shares 
at  a  par  value  of  $100  each,  issued  to  the  incorporators  according  to 
agreement  upon  organizing,  which  is  as  follows  : 

P.  E.  Gans 200  shares. 

W.  D.  Bell 175  shares. 

M.  S.  Sprague 150  shares. 

N.  V.  Taylor 125  shares. 

U.  S.  Adams „ 150  shares. 


ORGANIZATION   OF  CORPORATIONS  191 

CORPORATION  NO.  5 

Conditions:  Name,  "  Union  Transportation  Co.;"  Capital  Stock  $100,000,  divided  into  100  shares  at 
a  par  value  of  $1,000  each.  By  the  terms  of  the  subscriptions  these  shares  are  to  be  paid  for  by  assess- 
ments or  installments. 

Under  these  conditions,  the  books  should  be  opened  by  debiting  "Cash"  and  crediting  "Capital 
Stock  "  for  the  first  payment,  in  accordance  with  the  following  entry  : 

Cash .  . . $10, 000 

Capital  Stock ; $10. 000 

For  amount  of  first  assessment  of  10  per  cent,  of  the  Capital 
-    Stock  of  the  Union  Transportation  Co.,  organized  upon  the  basis  of 
$100,000,  divided  into  1C0  shares  at  a  par  value  of  $1,000  each, 
which   has   been   issued   to   the   following  incorporators  and  asso- 
ciates : 

A.  G    Davis 25  shares. 

C.  P.  Zaner 20  shares. 

I.  M.  Quinn 20  shares. 

D.  J.   Drummond 20  shares. 

M.  L.  Barclay 15  shares. 

According  to  this  method,  the  first  assessment  or  installment  of  10  per  cent  would  give  the  Capital 
Stock  account  a  credit  of  only  $10,000,  while  $100,000  is  the  nominal  value  of  the  100  shares  which  have 
been  subscribed  for  and  represents  the  incorporated  capital  of  the  company.  Therefore,  should  this  call 
of  10  per  cent  be  sufficient  for  operating  purposes  and  no  further  assessments  or  installments  are  necessary, 
the  Capital  Stock  account  would  have  a  credit  of  $10,000  only,  when  it  rightfully  should  have  a  credit  of 
$100,000.  If  the  Certificates  of  Stock  have  been  issued  for  $100,000,  it  is  hardly  sufficient  to  credit  the 
Capital  Stock  account  only,  for  the  $10,000  which  has  been  paid  in,  when  the  Certificates  of  Stock  have 
been  issued  representing  $100,000,  which  is  the  full  amount  of  the  Capital  Stock,  and  also  the  incorporated 
power  of  the  company. 

When  Cash  is  debited  and  Capital  Stock  credited  for  assessments  or  installments,  it  would  be  better  to 
issue  Installment  Scrip  to  the  stockholders  for  the  paid-in  assessments  or  installments,  and  not  issue  the 
Certificate  of  Stock  until  their  shares  have  been  fully  paid  up.  Should  the  company  conclude  that  75  per 
cent  of  the  stock  would  be  sufficient  for  operating  purposes,  then  you  should  carry  what  remains  unpaid 
on  the  books  by  charging  it  to  "  Contingency,"  "Franchise,"  or  some  other  suitable  account,  which  account 
could,  with  propriety,  be  carried  as  a  debit  on  the  books  without  having  any  effect  whatever  on  the  actual 
resources  of  the  business.  In  case  it  should  be  necessary  in  the  future  to  levy  assessments,  we  would  then 
debit  Cash  and  credit  "Contingency,"  "  Franchise, "  or  sucn  other  account  as  may  nave  been  previously 
used  for  crediting  up  the  Stock  account  in  full. 

CORPORATION    NO.  6 

Conditions:  Name,  ''-San  Francisco  Windmill  Manufacturing  Co.;"  Capital  Stock  $200,000,  divided 
into  2,000  shares  of  $100  each.  The  circumstances  under  which  this  company  was  formed  are  as  follows: 
an  inventor  without  means  has  patented  a  windmill.  He  finds  several  capitalists  who  become  interested  in. 
the  patent,  and  agree  to  associate  themselves  with  him  in  forming  a  company  for  the  purpose  of  manufactur- 
ing the  windmills.  These  incorporators  agree  to  pay  the  expenses  of  patenting,  etc. ,  and  allow  the  inventor 
200  shares  of  paid-up  stock  for  his  patent.  The  stc  k  subscribed  by  the  incorporators  is  not  sufficient  to 
take  up  the  whole  amount  of  the  Capital  Stock.     The  balance  is  to  be  carried  as  "Treasury  Stock." 

The  above  conditions  would  require  the  following  opening  entry: 

Windmill  Account $     20,000 

Franchise 100,000 

Treasury  Stock 80,000 

Capital  Stock '  $200,000 

For  amount  of  2,000  shares  of  stock  at  a  par  value  of  $100 
each,  which  represents  the  Capital  Stock  of  the  San  Francisco 
Windmill  Manufacturing  Company,  incorporated  on  the  basis 
of  $200,000,   of   which  200   shares   have   been  issued  to  A  in , 


192  ORGANIZATION   OF   CORPORATIONS. 

payment  of  his  right,  title,  claim,  and  interest  as  an  individual 
in  and  to  his  patent  windmill. 

A,    Inventor 200  shares. 

B 275  shares. 

C 250  shares. 

D 225  shares. 

E 250  shares. 

CORPORATION  NO.  7 

Conditions:  Name,  " Nevada  Mining  Co.;"  Capital  Stock  $150,000,  divided  into  300  shares  of  $500 
each.  This  corporation  was  formed  under  the  following  circumstances:  Geo.  Hillard,  the  owner  of  a  silver 
mine,  sells  the  same  to  a  party  of  capitalists,  who  form  a  company,  allowing  Mr.  Hillard  60  shares  of  paid- 
up  capital  stock  for  his  interest  in  the  mine.  Of  the  remaining  shares  140  are  subscribed  for  by  the  other 
incorporators,  and  100  shares  are  reserved  for  "Working  Capital  "  to  be  sold  from  time  to  time  for  opera- 
ting purposes. 

The  above  conditions  would  require  the  following  opening  entry: 

Hillard  Mine $  30, 000 

Franchise 120,000 

Capital  Stock $100,000 

Working  Capital 50,000 

For  the  appraised  value  of  the  Hillard  Mine,  located  in  the 
northern  part  of  Humboldt  Co.,  State  of  Nevada,  which  has  been 
deeded  to  the  Nevada  Mining  Co. ,  by  Geo.  Hillard,  together  with  all 
his  rights,  title,  claims,  and  privileges  as  per  deed  dated  Oct.  20, 
19 — i.  The  said  company  is  incorporated  on  the  basis  of  $150,000 
Capital  Stock,  divided  into  300  shares  at  a  par  value  of  $500  each. 
The  subscribed  stock  has  been  divided  and  paid  for  according  to  the 
division  made  among  the  first  seven  stockholders  whose  names  ap- 
pear on  the  Stock  Subscription  Book. 

CORPORATION   NO.  8 

Conditions:  Name,  "The  Maze;"  Capital  Stock  $160,000,  divided  into  3,200  shares,  at  a  par  value  of 
$50  each.  This  company  was  organized  under  the  following  circumstances:  Benjamin  Patrick,  a  merchant 
owning  an  extensive  business,  desires  to  incorporate,  in  order  to  secure  certain  rights  and  privileges,  as 
provided  by  the  corporation  laws  of  the  State  in  which  the  business  is  conducted.  Practically  speaking, 
Mr.  Patrick  is  still  to  own  the  whole  concern,  but  as  the  law  requires  at  least  five  incorporators  in  order 
legally  to  form  the  corporation,  the  proprietor  associates  with  him  a  certain  number  of  stockholders  whom 
he  secures  by  giving  or  selling  a  few  shares,  at  a  nominal  price,  to  each.  These  incorporators  may  be  his 
clerks,  or  personal  friends,  or  even  members  of  his  own  family.  The  property  upon  which  the  corporation 
is  based,  consists  of  various  resources  and  liabilities.     It  is  decided  to  name  the  corporation  ' « The  Maze. '' 

The  following  would  be  a  suitable  opening  entry  for  the  foregoing  conditions: 

Merchandise $100,000 

Personal  account  (to  be  entered  separately) 10,000     . 

Bills  Receivable 20,000 

Real  Estate 50,000 

Bills  Payable $     5,000 

Personal  accounts  (to  be  entered  separately) 15,000 

Capital  Stock 160. 000 

For  amount  of  3,200  shares,  at  a  par  value  of  $50  each,  of  the 
Capital  Stock  of  "The  Maze"  at  the  corner  of  Market  and 
Taylor  streets,  San  Francisco,  Cal.,  organized  upon  a  basis  of 
$150,000  Capital  Stock,  which  is  divided  among  the  incorporators 
and  associates  as  follows: 


ORGANIZATION   OF  CORPORATIONS  193 

Ben j.   Patrick 3,175  shares. 

J.   Phillips 5  shares. 

E.  L.   Thomas 5  shares. 

W.   L.  Randolf 5  shares. 

Fred  Loomis 5  shares. 

H.  B.  Millis 3  shares. 

T.  Barber 2  shares. 

"  Figure  Head." — This  term  is  a  term  that  is  sometimes  applied  to  those  stockholders  who  are  not 
financially  interested  in  the  company,  but  who  are  given  a  small  number  of  shares  at  a  nominal  price  for 
the  purpose  of  using  them  as  officers,  or  for  the  purpose  of  making  up  the  required  number  of  stockholders 
which  the  law  of  the  various  States  require  on  organizing.  For  example,  all  of  the  above  stockholders 
might  be  called  ''figure  heads"  except  the  first  one,  Benj.  Patrick. 

CONSOLIDATION  OF  CORPORATIONS 

It  is  often  desirable  to  consolidate  two  or  more  corporations  into  a  single  concern.  In  doing  this,  it  is 
important  to  make  an  equitable  adjustment  of  the  new  company's  present  worth,  among  the  respective 
stockholders  of  the  old  companies.  The  following  statement  and  opening  entries  are  prepared  to  illustrate 
the  consolidation  of  two  companies,  the  "Fulton  Iron  Works"  and  the  "  Union  Iron  Works,"  into  a  new 
company  to  be  called  the   "Pacific  Coast  Iron  Works." 

STATEHENT  OF  THE  FULTON  IRON  WORKS 

Capital  Stock,  $50,000,  divided  into  500  shares  at  a  par  value  of  $100  each. 

Resources 

Merchandise $10,260  50 

Raw  Material 16,420  30 

Real  Estate 15,000  00 

Tools 7,360  00 

Cash 1,624  20 

Bills  Receivable 2,300  00     $52,965  00 

Liabilities 

Bills  Payable $4,200 

C.  W.  Wheeler 1,205 

Taxes,  unpaid 250 

Present  Worth  of  Company 47,310 

The  following  is  a  list  of  the  stockholders,  the  amount  of  stock  held  by  each,  the  amount  paid  in  on 
the  same,  etc. : 

N.  S.  Jones,  100  shares,  par  value  $100,  paid  up  in  full.. .  $10,000 
C.E.  Howard,  100  shares,  par  value  100,  paid  up  in  full. .  .  10,000 
J.  A.  Wiles,  90  shares,  par  value  100,  75  per  cent,  paid  in  6,750 
W.J.  Mc  Lean,  90  shares,  par  value   100,  75  per  cent,  paid  in         6,750 

F.  M.  Ray,  80  shares,  par  value  100,  50  per  cent,  paid  in  4,000 
W.  S  Hull,  80  shares,  par  value  100,  50  per  cent,  paid  in  4,000 
Paid-up  capital  of  the  company 41, 500 

From  the  above  statement,  it  will  be  observed  that  the  company's  present  worth  is  $47,310  and  its 

paid-up  capital  is  $41,500,  which  will  entitle  each  stockholder  to  $1.14  on  each  dollar  paid  in.     These 

amounts  are  to  be  paid  to  the  old  stockholders  by  the  new  company  in  stock,  and  by  placing  all  fractional 

sums  which  are  less  than  one  share  to  the  credit  of  the  respective  stockholders  as  arranged  in  the  following 

entry: 

STATEHENT  OF  THE  UNION  IRON  WORKS. 

Capital  Stock,  $60,000,  divided  into  600  shares  at  a  par  value  of  $100. 

Machinery $20,000 

Bills  Receivable 10,000 

Cash 4,875 

Company's  present  worth $34,875 

The  following  is.  a  list  of  the  stockholders,  the  amount  of  stock  held  by  each,  the  amount  paid  in  on 

the  same.  etc. ; 


194  ORGANIZATION   OF   CORPORATIONS 

E.  K.  Kingman,  150  shares,  par  value  $100,  paid  up  m  full $15,000 

H.  B.  Brown,       125  shares,  par  value    100,  paid  up  in  full 12,500 

•  0t.  W.  Fuller,       100  shares,  par  value    100,  50  per  cent,  paid  in 5,000 

J.  E.  Martin,          75  shares,  par  value    100,  50  per  cent,  paid  in 3,750 

W.  E.  Clark,           50  shares,  par  value    100,  50  percent,  paid  in 2,500 

Paid-up  capital  of  the  company 38,750 


From  the  above  statement,  it  will  be  observed  that  the  company's  present  worth  is  $34,875  and  its 
paid-up  capital  is  $38,750,  which  will  entitle  each  stockholder  to  90  cents  on  each  dollar  paid  in.  These 
amounts  are  to  be  paid  by  the  new  company  in  stock,  and  all  fractional  sums  which  are  less  than  one  share 
should  be  placed  to  the  credit  of  the  respective  stockholders,  as  arranged  in  the  following  entry  : 

Journal  entry  for  consolidating  the  Fulton  Iron  Works  and  the  Union  Iron  Works  as  one  company 
under  the  firm  name  of  the  Pacific  Coast  Iron  Works,  with  a  Capital  Stock  of  $200,000,  divided  into  1,000 
shares  at  a  par  value  of  $100  each,  and  500  Founders'  Shares  at  a  par  value  of  $200  each.  The  ordinary 
shares  are  to  have  a  Cumulative  Preference  Dividend  of  eight  per  cent  per  annum,  plus  one  half  of  the  sur- 
plus profits,  while  the  Founders'  Shares  are  to  receive  the  other  half  of  the  profits  after  the  eight  per  cent 
has  been  paid.  The  vendor,  N.  S.  Jones,  of  the  Fulton  Iron  Works  Company,  is  to  receive  $20,000  in  fully 
paid-up  Stock  in  excess  of  his  interest  in  the  company. 

Franchise  Dr.  for  all  stock  subscribed $183,900  00 

Treasury  Stock  for  all  stock  unsubscribed 16,100  00 

Mdse.  furnished  by  Fulton  Co 10,260  50 

Raw  Material  by  Fulton  Co 16,420  30 

Real  Estate  by  Fulton  Co 15,000  00 

Tools  by  Fulton  Co 7,360  00 

Cash,  Fulton  Co.  $1,624.20,  Union  Co.  $4,875 6,499  20 

Cash  for  new  stock  sold  D.  W.  Springer 50,000  00 

Bills  Receivable,  Union  Co.  $10,000,  Fulton  Co.  $2,300 12,300  00 

Machinery  furnished  by  Union  Co 20, 000  00 

Capital  Stock $200,000  00 

Bills  Payable  Fulton  Co 4,200  00 

C  W.  Wheeler,  Fulton  Co 1,205  00 

Taxes  unpaid  Fulton  Co 250  00 

A.  J.  Wiles,        Cr.  for  Bal.  due  from  old  Co 95  00 

W.  S.  Hull,         Cr.  for  Bal.  due  from  old  Co .  60  00 

W.  J.  Mc  Lean,  Cr.  for  Bal.  due  from  old  Co 95  00 

F.  M.  Ray,  Cr.  for  Bal.  due  from  old  Co 60  00 

H.  B.  Brown,       Cr.  for  Bal.  due  from  old  Co 50  00 

J.  E.  Martin,       Cr.  for  Bal.  due  from  old  Co 75  00 

W.  E.  Clark,       Cr.  for  Bal.  due  from  old  Co 50  00 

Franchise  for  amount  paid  in 131,700  00 

For  nominal  value  of  the  Pacific  Coast  Iron  Works  Stock,  incor- 
porated on  a  basis  of  $200,000  Capital  Stock,  divided  into  1,000 
shares  at  a  par  value  of  $100  each,  and  500  Founders'  shares  at  a 
par  value  of  $200  each.  The  ordinary  shares  are  to  have  a  Cumula- 
tive Preference  Dividend  of  8  per  cent  per  annum,  plus  one  half  of 
the  surplus  profits,  while  the  founders  are  to  receive  the  other  half 
of  the  profits,  after  the  8  per  cent    has  been  paid. 

This  company,  The  Pacific  Coast  Iron  Works   is  the  outcome  of  consolidating  the  Fulton  Iron  Works 
and  Union  Iron  Works,  and  is  to  be  conducted  by  the  following  stockholders: 


ORGANIZATION   OF -CORPORATIONS 


195 


Vendor  (N.  S.  Jones),  100  ordinary  and  50  founders'  shares. 


N.  S.  Jones, 

C.  E.  Howard, 
A.  J.  Wiles, 
W.  J.  McLean, 

F.  M.  Ray, 
W.  S.  Hull, 

E.  K.  Kingman, 
H.  B.  Brown, 

G.  W.  Fuller, 
J.  E.  Martin, 
W.  F.  Clark, 

D.  W.  Collins, 
C.  J.  Craddock, 


114  ordinary 

114  ordinary 

76  ordinary 

76  ordinary 

45  ordinary 

45  ordinary 

135  ordinary 

112  ordinary 

45  ordinary 

33  ordinary 

22  ordinary 

300  founders' 

111  founders' 


shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 
shares, 


in  full. 

in  full 

in  full 

in  full 

in  full ,.... 

in  full 

in  full 

in  full 

in  full 

in  full 

in  full 

at  $200,  83£%  paid  in. 
at  $200,  unpaid 


paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 
paid  up 


$20,000 

11,400 

11,400 

7,600 

7,600 

4,500 

4,500 

13,500 

11,200 

4,500 

3,300 

2,200 

50,000 


Omissions  in  Consolidating  Companies. —  It  sometimes  happens  that  omissions  occur  in  the 
resources  or  liabilities  at  the  time  of  consolidating  partnership  or  stock  companies.  When  this  is  the  case, 
it  will  be  necessary  to  adjust  the  matter  between  those  who  were  stockholders  at  the  time  of  making  the 
change.  For  example:  If  the  Fulton  Iron  Works  has  made  a  mistake  of  $1,000  in  their  favor  in  taking 
stock  of  the  raw  material,  it  should  be  adjusted  among  the  stockholders  of  that  company,  by  either  paying 
them  cash  for  their  proportion  of  the  $1,000,  or  crediting  them  for  the  same  on  the  new  company's  books, 
or  by  issuing  them  stock  to  that  amount.  The  Raw  Material  account  should  be  debited.  In  case  the 
omission  was  a  liability,  then  it  would  be  necessary  for  the  stockholders  to  pay  in  cash  for  their  share  of  it, 
or  to  be  charged  up  for  the  same,  or  surrender  enough  of  their  stock  to  cover  the  same.  The  Raw  Material 
account  should  be  credited. 

Closing  When  There  is  a  Loss. — If  the  Loss  and  Gain  account  should  show  a  loss,  the  loss 
should  be  disposed  of,  of  course,  according  to  the  instruction  of  the  directors,  which  would  probably 
be  either  to  close  it  into  balance  or  into  Impairment  Fund  as  follows:  Suppose  the  Net  Loss  to  be 
$500,  then  the  Journal  entry  would  be: 

Impairment  Fund $500 

Loss  and  Gain $500 

Some  other  name  than  Impairment  Fund  might  be  suggested,  but  the  effect  would  be  the  same. 
If  closed  without  Journal  entry,  Impairment  Fund  $560  would  be  written  on  the  credit  side  of  Loss 
and  Gain  account  in  red  ink,  and  then  carried  to  the  debit  side  of  Impairment  Fund  account  in  black 
ink.     For  closing  "Direct,"  see  page  35;  by  Journal  Entries,  see  page  37. 

When  there  is  a  legitimate  profit,  the  Impairment  Fund,  or  loss,  will  have  to  be  deducted  before 
a  dividend  is  distributed.  Suppose  at  the  next  profit-taking  period  the  Loss  and  Gain  account  should 
show  a  net  profit  of  $2500,  and  the  directors  should  decide  to  make  up  the  loss  (balance  the  Impair- 
ment Fund  account)  declare  a  dividend  of  $1800  and  put  $200  in  the  Surplus  Fund  account.  Then 
after  closing  (if  closed  direct  in  red  ink)  the  Loss  and  Gain  account  would  show  as  follows: 


Loss  and  Gain 

Impairment  Fund $     500 

Dividend  No 1800 

Surplus  Fund 200 


12500 


$2500 


>2  500 


The  loss  may  be  carried  to  the  debit  side  of  the  Reserve  Fund  account  and  allowed  to  remain 
there  until  sufficient  profit  is  made  to  balance  it  or  to  overbalance  it  to  sufficient  extent  to  declare  a 
dividend. 

If  there  should  be  a  profit  but  not  sufficient  to  meet  the  dividend  desired,  the  Loss  and  Gain 
account  is  then  generally  closed  into  Undivided  Profit  account,  and  the  profit  allowed  to  stand  in  the 
credit  of  Undivided  Profit  account  until  such  time  as  there  may  be  sufficient  profit  to  declare  the 
desired  dividend  or  until  such  time  as  the  directors  decide  to  dispose  of  the  profit  in  some  other  way. 


iyt) 


GENERAL  REVIEW 


JOINT  STOCK  COMPANIES 

The  Century  Dictionary  defines  a  Joint  Stock  Company  as  follows:  "Joint  stock  company,  (a) 
An  association  the  property  or  capital  of  which  is  represented  by  stock  issued  in  shares  to  the  members 
respectively,  the  object  being  that  changes  in  membership  shall  depend,  not,  as  in  partnership,  upon 
the  consent  of  all  the  members,  but  upon  the  transfer  of  shares,  which  any  member  may  make  without 
the  consent  of  the  others,  and  also  that  the  death  of  a  member  shall  not  dissolve  the  association,  as 
in  case  of  a  partnership,  his  right  being  simply  transferred  to  his  executors  or  administrators.  An- 
other object  usually  if  not  always  involved  is  the  rendering  of  the  power  of  control  separable  from 
the  right  of  ownership,  by  vesting  the  management  in  a  committee  or  officers  instead  of  leaving  it,  as 
in  the  case  of  a  partnership,  with  each  member.  In  the  absence  of  any  statute  the  liability  of  a  joint 
stock  company  and  its  members,  and  its  means  of  enforcing  its  right  as  to  third  persons,  are  never- 
theless precisely  those  of  partners:  all  the  members  must  join  in  suing;  all  are  liable  for  its  debts, 
and  all  must  be  joined  when  sued;  and  on  a  change  of  membership  pending  a  suit  a  corresponding 
change  of  parties  may  be  required.  To  obviate  these  inconveniences,  statutes  have  been  passed  in 
several  of  the  United  States  allowing  such  associations  to  sue  and  be  sued  in  the  name  of  the  president 
or  treasurer.  In  respect  to  internal  controversies,  the  courts,  even  without  the  aid  of  statute,  follow 
the  analogies  afforded  by  the  law  of  corporations,  so  far  as  this  can  be  done  without  conceding  to  unin- 
corporated associations  the  right  to  have  a  common  seal,  and  to  have  succession  and  sue  and  be  sued 
as  a  distinct  artificial  person.  (b)  An  association  for  similar  objects,  but  having  the  express  sanc- 
tion of  statute  for  its  organization  as  a  corporation.  In  both  classes  of  companies  the  members 
contribute  [to  the  capital]." 


GENERAL    REVIEW 


SPECIAL    REVIEW   QUESTIONS 


1.  What  is  a  corporation? 

2.  Name  the  general  classes  of  corporations. 

3.  What  are  private  corporations? 

4.  In  what  respects  do  corporations  differ  from  part- 
nerships? 

5.  As  a  rule,  how  many  persons  are  required  to  form 
%  corporation? 

6.  Name  the  consecutive  steps  in  the  formation  of  a 
corporation? 

7.  What  is  meant  by  "Articles  of  Incorporation  "? 

8.  What  must  the  Articles  of  Incorporation  set  forth? 

9.  How  is  the  charter  for  a  corporation  obtained? 

10.  Name  the  principal  powers  of  corporations. 

11.  What  are  the  general  duties  of  corporations? 

12.  What  are  the  general  liabilities  of  corporations? 

13.  Are  the  laws  regulating  corporations  in  the  differ- 
ent States  uniform? 

14.  How  may  a  corporation  be  dissolved? 

15.  When  a  corporation  is  dissolved,  what  disposition 
is  made  of  its  affairs  and  property? 

16.  What  is  a  charter? 

17.  What  is  a  franchise? 

18.  Distinguish  between  "Franchise"  and  "Charter." 
19..  What  is  a  Stock  Certificate? 

20.  Are  stock  certificates  negotiable9' 


21.  How  may  they  be  transferred? 

22.  What  is  meant  by  "Ordinary  Stock"? 

23.  What  is  preferred  stock? 

24.  In  the  distribution  of  dividends,  what  advantage 
has  preferred  stock  over  ordinary  stock  ? 

25.  Why  do  some  corporations  issue  different  classes 
of  stock? 

26.  Can  corporations  allow  dividends  out  of  the  pro- 
ceeds of  sales  of  Preferred  Stock? 

27.  What  is  meant  by  "Guaranteed  Stock''? 

28.  By  what  other  name  is  guaranteed  stock  known? 

29.  In  the  matter  of  dividends,  what  advantage  has 
guaranteed  stock  over  other  stock? 

30.  What  is  meant  by  "  Deferred  Stock  "? 

31.  How  may  deferred  stock  become  actual  stock? 

32.  With  regard  to  their  rights  as  to  the  management 
of  the  company,  how  do  the  holders  of  deferred  stock 
differ  from  the  holders  of  ordinary  stock. 

33.  What  is  meant  by  "Non-assessable  Stock"? 

34.  What  is  Treasury  Stock? 

35.  What  is  meant  by  the  term  "Watered  Stock"? 

36.  What  circumstances  sometimes  give  rise  to  the 
issue  of  watered  stock? 

37.  What  is  meant  by  the  "Capital  Stock"  of  a  cor- 
poration? 

38.  Capital  stock  is  usually  issued  in  what  denomina- 
tions? 

39.  Is  the  total  capital  stock  of  a  company  necessarily 
equal  to  the  value  of  the  property  owned  by  the  conv 
pany? 


GENERAL  REVIEW 


197 


40.  Does  the  amount  of  the  capital  stock  of  a  company 
change  with  the  fluctuations  in  the  value  of  the  com- 
pany's property? 

41.  How  are  corporations  taxed? 

42.  Has  a  stockholder  of  a  company  any  right  to  the 
possession  of  the  property  of  the  company? 

43.  What  are  the  rights  of  stockholders? 

44.  Is  unpaid  stock  to  be  considered  as  a  part  of  the 
assets  of  a  corporation? 

45.  Who  are  the  trustees  of  the  capital  stock  of  a 
corporation? 

46.  What  is  meant  by  "Working,  or  Operating,  Capital"  ? 

47.  By  what  means  is  the  operating  capital  of  a  com- 
pany sometimes  increased? 

48.  What  is  meant  by  the  term  "Plant  "? 

49.  Do  the  stockholders  of  a  corporation  all  have  an 
equal  voice  in  the  direction  of  its  affairs? 

50.  Are  the  subscribers  to  the  stock  of  a  corporation 
liable  to  the  corporation  should  they  fail  to  pay  for  the 
stock  subscribed? 

51.  Is  the  issuing  of  stock  certificates  necessary  to  per- 
fect a  subscription? 

52.  What  is  necessary  to  perfect  a  stock  subscription? 

53.  How  are  the  voting  rights  of  a  stockholder  regu- 
lated? 

54.  What  is  meant  by  "  Gross  Earnings  *  ?  ■«  Net  Earn- 
ings "  ? 

55.  What  is  a  Dividend? 

56.  How  are  dividends  calculated? 

57.  How  are  dividends  apportioned  among  the  stock- 
holders? 

58.  What  is  a"Preferred  Dividend  '? 

59.  What  is  a  "  Stock  Dividend  "  ? 

60.  What  circumstances  give  rise  to  the  issue  of  stock 
dividends. 

61.  What  is  meant  by  "  Declaring  a  Dividend  "? 

62.  By  whom  are  dividends  declared! 

63.  What  consideration  should  regulate  the  declaration 
of  dividends? 

64.  Under  what  cir  ,umstances  might  a  company  be 
justifiable  in  borrowing  money  in  order  to  declare  a 
dividend? 

65.  What  is  meant  by  a  "  Dividend  Certificate'? 

66.  Are  dividend  certificates  transferable? 

67.  What  is  meant  by  "  Passing  a  Dividend  "  ? 

68.  What  is  a  "  Fictitious  Dividend,"  and  what  is  the 
purpose  of  issuing  it? 

69.  What  is  a  Surplus  Fund? 

70  How  does  a  reserve,  or  contingent,  fund  differ 
from  a  surplus  fund? 

71.  What  is  a  Sinking  Fund? 

72.  What  is  meant  by  "Rest  Account"? 

73.  What  is  an  Assessment,  a?  d  how  is  it  levied? 


74.  What  is  an  Installment? 

75.  What  is  sometimes  done  when  a  stockholder  fails 
to  pay  installments? 

76.  Under  what  circumstances   is  a  notice  to  stock- 
holders of  the  collection  of  an  installment  unnecessary? 

77.  What  is  said  regarding  the  issuing  of  stock  cer- 
tificates prior  to  the  payment  of  aii  installments? 

78.  What  is  "  Installment  Script  "  ? 

79.  What  is  meant  by  "Par  value"?  "  Market  value  "  ? 

80.  What  are  "Quotations"? 

81.  What  is  a  Stock  Exchange? 

82.  What  are  "  Limited  Corporations"? 


83.  How  is  the  public  notified  that  a  corporation  is 
limited? 

84.  What  is  meant  by  "double  liability"  ? 

85.  What  is  a  Trust  and  how  is  it  formed? 

86.  What  is  a  Syndicate? 

87.  What  is  meant  by  a  "bonus"? 

88.  What  is  the  purpose  of  a  Miiaute  Book? 

89.  How  often  do  the  regular  meetings  of  corporation 
stockholders  usually  occur? 

90.  By  whom  are  the  affairs  of  a  corporation  con- 
trolled? 

91.  What  is  the  purpose  of  the  Stock  Subscription 
Book? 

92.  Under  what  circumstances  is  a  Stock  Subscription 
Book  dispensed  with?  In  this  case,  what  is  used  in  its 
place  ? 

93.  At  what  time  is  a  Stock  Subscription  Book 
opened? 

94.  What  is  the  purpose  of  the  Stock  Certificate 
Book? 

95.  How  is  a  certificate  of  stock  transferred? 


96.  What  course  is  usually  taken  when  stock  is  for 
feited  through  delinquent  payments? 

97.  What  is  the  purpose  of  a  Stock  Journal? 


98.  What  is  the  purpose  of  a  Stock  Ledger? 

99.  Under  what  circumstances  would  a  Stock  i ...dger 
be  used? 

100.  What  general  requirement  in  closing  Corporation 
Books '( 

iOi.  What  is  the  purpose  of  the  Dividend  Receipt 
Book  ? 

102.  In  case  the  stockholder's  signature  cannot  be  ob- 
tained, how  may  his  receipt  for  dividends  paid  be  se- 
cured? 

103.  What  is  a  dividend  check? 


104.  What  is  the  purpose  of  the  Installment  Book? 

105.  Is  a  stockho  der  allowed  to  transfer   stock   until 
delinquent  ,nstailments  have  been  paid? 

106.  What  course  is  usually  taken  when  it  is  found 
necessary  to  borrow  money  in  order  to  pay  dividends? 

107    When  are  dividends  credited  as  a  payment  upon 
unpaid  stock? 

i08.  What  is  the  purpose  of  an  Assessment  Book? 

109.  How  is  a  notice  of  assessment  usually  given? 

110.  Upon  the  dissolution  of  a  corporation,  how  are 
the  books  closed? 

111.  How  is  stock  surrendered? 

112.  What  is  meant  by  "  Transferring  Stock"  ? 

113.  How  are  stock  certificates  canceled? 

114.  Give  the  general  steps  necessary  to  change  a  cor> 
poration  to  a  single  proprietorship. 


BANKING 


A  Bank -is  an  institution  for  facilitating  the  safe  keeping,  borrowing,  loaning,  and  circulation  of  money. 
Banks  are  divided,  according  to  their  functions  and  the  character  of  their  business,  into  several  classes, 
each  class  being  regulated  to  a  greater  or  less  extent  by  national  or  State  laws. 

Private  Banks. —  These  are  unincorporated  banking  enterprises,  conducted  by  private  individuals. 
They  are  under  fewer  legal  restrictions  than  are  other  banks,  and  their  principal  business  is  the  loaning  of 
money,  the  discounting  of  paper,  etc.  In  some  States  private  banks  are  not  allowed  to  receive  general 
deposits. 

State  Banks. —  State  Banks  are  corporate  institutions  formed  under  the  laws  of  the  several  States. 
There  is,  therefore,  much  variation  as  to  their  management  and  responsibilities.  As  a  rule,  they  do  a 
general  banking  business,  buying  and  selling  drafts,  negotiating  loans  for  municipal  and  other  corporations, 
discounting  paper,  etc.  Formerly  they  issued  their  own  bills,  which  circulated  as  money;  but  since  the 
adoption  of  the  congressional  act  taxing  such  issue  ten  per  cent  ,  State  banks  have  found  the  issue  of  their 
bills  unprofitable,  and  have  withdrawn  them  from  circulation. 

Savings  Banks. —  These  banks  make  a  business  of  receiving  small  sums  on  deposit,  upon  which  they 
pay  interest  at  certain  periods.  Savings  Banks  are  usually  subject  to  strict  legal  regulations  with  a  view  to 
the  protection  of  the  depositors.     Savings  banks  are  regulated  by  State  law,  and  are  therefore  State  Banks. 

National  Banks. — These  are  institutions  incorporated  under,  and  regulated  by,  the  United  States 
law  known  as  "The  National  Banking  Act."  National  banking  corporations  must  deposit  United  States 
Bonds  with  the  United  States  Treasurer  equal  to  one-fourth  of  their  capital  stock,  unless  the  capital 
^tock  is  more  than  $150,000,  when  the  banking  association  must  deposit  at  least  850,000  par  value  of 
bonds.  These  bonds  are  called  Charter  Bonds.  A  national  bank  may  issue  circulating  notes  to  the 
amount  of  its  fully  paid  capital  stock  providing  it  deposits  Government  Securities  to  an  equal  amount. 
Every  national  bank  must  accept  the  circulating  notes  of  every  other  national  bank  at  par.  If  the 
market  value  of  the  deposited  bonds  should  fall  below  the  par  value,  the  Comptroller  of  the  Currency 
will  call  for  additional  bonds  to  cover  the  full  face  value  of  the  circulating  notes  of  the  bank.  In  case 
of  failure  of  the  bank,  the  bonds  deposited  with  the  United  States  Treasurer  will  be  sold  and  the  pro- 
ceeds used  to  redeem  the  circulating  notes  of  the  bank. 

National  bank  notes  circulate  freely  as  money,  although  they  are  not  legal  tender.  See 
'•Money,"  Chapter  VI,  Part  II. 

National  banks  are  by  law  made  financial  agents  of  the  United  States  ;  they  are  also  required  to 
make  at  least  five  reports  a  year  to  the  Comptroller  of  the  Currency,  and  are  subject  to  national 
taxes  upon  their  outstanding  notes,  and  their  paid-up  capital.  National  banks  draw  interest  upon  the 
bonds  deposited  to  secure  their  notes  of  issue,  but  are  subject  to  a  number  of  restrictions.  A 
majority  of  the  organizers  and  directors  of  national  banks  must  be  residents  of  the  State  wherein  ihs 
bank  is  established. 

Bank  Offices  and   Employees The  official  and  working  force  of  an  incorporated  bank  usually 

consists  of  the  President,  Vice-President,  Cashier,  Receiving  Teller,  Paying  Teller,  and  such  other  assistants, 
clerks,  messengers,  watchmen,  etc.,  as  the  concern  may  require. 

The  President  is  usually  the  responsible  head  of  the  institution,  directing  its  policy  and  exercising 
a  general  supervision  over  the  work  of  the  other  employees. 

The  Vice=President  performs  the  duties  of  the  President  in  the  latter's  absence  or  death.  In  some 
bank  organizations  this  office  is  omitted,  the  duties  being  performed  by  the  Cashier. 

Cashier. — Next  to  that  of  the  President,  this  is  the  most  responsible  position  in  a  bank.  The 
Cashier  exercises  direct  supervision  over  all  the  detailed  work  of  the  bank.  He  acts  as  the  secretary  of 
the  Board  of  Directors,  and  with  the  President  signs  all  official  documents  and  other  obligations  of  the 
corporation. 

The  correspondence  of  the  bank  is  conducted  in  the  name  of  the  Cashier;  he  also  signs  all  drafts, 
certified  checks,  certificates  of  deposit,  etc. ;  and  he  is  usually  the  responsible  custodian  of  the  funds,  and 
other  property  of  the  bank. 

The  Cashier  is  elected  by  the  Board  of  Directors,  and  he  is  often  required  to  give  a  bond  for  the  faithful 
performance  of  his  duties. 

Paying  Teller. —  The  duties  of  the  Paying  Teller  are  to  pay  out  all  money  for  checks,  or  other  papers 
that  may  be  presented.     In  responsibility,  his  position  ranks  next  to  that  of  the  Cashier. 

Receiving  Teller. —  This  office  receives  all  moneys  paid  into  the  bank,  also  checks,  bonds,  and  other 
documents  for  deposit.     The  Tellers  may  be  regarded  as  assistants  of  the  Cashier.     If  the  bank  is  a  small 

[198] 


BANKING 


199 


Institution  in  a  country  town,  the  Tellers  are  often  dispensed  with.     On  the  other  hand,  in  large  city  institu 
tions,  there  may  be  a  number  of  both  Receiving  and  Paying  Tellers. 

In  fact,  the  official  force  of  a  bank  is  a  matter  that  will  depend  entirely  upon  the  amount  and  char- 
acter of  the  business  done.  The  general  rules  governing  the  organization  and  workings  of  banks  are  the 
Bame  as  those  regulating  the  operation  of  other  corporations. 

Bank  Bookkeeping. — Bookkeeping  in  banks  differs  only  in  form  from  that  of  other  commercial 
institutions.  It  usually  involves  only  the  simplest  principles,  and  there  is  little  variety  in  the  accounts,  the 
number  and  kind  of  which  will  depend  upon  the  circumstances. 

As  in  other  kinds  of  business,  there  is  much  diversity  in  the  style,  form,  and  kinds  of  books  used, 
these  depending  upon  the  amount  and  character  of  the  business  and  the  individual  preference  of  the 
bookkeeper.  Those  commonly  used  are  the  Cash  Book,  Journal,  Discount  Register,  Collection  Register, 
Depositors'  Ledger,  and  General  Ledger. 

For  the  purpose  of  acquiring  a  knowledge  of  ordinary  bank  bookkeeping,  it  will  be  sufficient  if  the 
Btudent  acquires  a  familiarity  with  the  use  of  these  books,  as  other  books,  when  used,  are  merely  a  modi- 
fication of  some  of  these. 

OPENING   ENTRY 

This  should  be  entered  in  the  Journal,  and  it  does  not  materially  differ  from  the  forms  required  in 
other  corporations,  or  business  concerns. 

National  banks  keep  some  accounts  that  do  not  appear  on  the  books  of  private  or  State  banks. 
The  following  is  a  suitable  opening  entry  for  a  National  bank: 


CHICAGO,  ILL.,  JULY  1,  19 


C.  B.        Cash  39,300 

U.  S.  Bonds  40,000 

Premium  on  U.  S.  Bonds  6,400 

U.  S.  Treasury  1,800 

Real  Estate     '  25,000 

Bills  Discounted  20,000 

Fixtures  3,500 
To  Capita]  Stock  100,000 

"  Circulating  Medium  36,000 

For  the  nominal  amount  of  the  capital  stock  of  the  First  National  Bank  of 
Chicago,  111.,  incorporated  upon  the  basis  of  $100,000  capital  stock,  divided  into 
1,000  shares  of  $100  each,  and  issued  to  the  incorporators  and  associates  at  their 
par  value,  as  per  the  first  ten  names  that  appear  on  the  first  page  of  the  Stock 
Subscription  Book. 


The  above  explanation  may  include  a  list  of  the  stockholders  if  desired.  See  opening  entry  on  next 
page. 

A  deposit  of  5  per  cent  of  the  circulating  medium  is  required  by  the  government  for  the  purpose  of 
redeeming  the  worn-out  and  torn  notes  of  the  bank  that  puts  them  into  circulation.  For  example  :  In  a 
city  of  20,000  population,  it  would  be  necessary  to  deposit  $40,000  in  bonds  with  the  government  ;  and  in 
return  it  would  issue  bank  notes  to  the  bank  to  the  amount  of  nine  tenths  of  the  bonds,  or  $36,000.  On 
this  amount  of  circulating  medium  there  would  be  required  a  deposit  of  $1800,  which  is  charged  to  U.  S. 
Treasury  Account. 

The  government  bonds  that  are  deposited  with  the  Secretary  of  the  Treasury  are  not  bought  of  the 
government,  but  of  private  individuals  or  corporations.  It  is  sometimes  necessary  to  pay  a  premium  of 
X5  or  20  per  cent   in  order  to  secure  them. 

In  the  above  opening  entry  the  rate  of  premium  is  16  per  cent  ,  and  the  amount  paid,  $4,000,  will 
naturally  remain  on  the 'book  as  a  resource,  although  it  will  gradually  decrease  in  value  as  the  bonds 
approach  maturity.  The  amount  paid  in  premium  ultimately  becomes  a  total  loss  at  the  maturity  of  the 
bonds,  as  the  government  redeems  them  at  their  face  value  only,  regardless  of  what  may  have  been,  paid 
for  them. 


200 


ORGANIZATION   OF  CORPORATIONS 


Date 
Left  tor 
Collec- 
tion 

No. 

of 

Paper 

Payer's  Name 

Face  of 
Paper 

Amount 

to  be 
Collected 

Rate 

of 
Col. 

Amount 

of 

Collection 

Proceeds  and  How  Dis- 
posed of, 
"  Paid  "  or  "  Credited  " 

< 

For  Whom  Col- 
lected 

19 
May 

2 
5 

36 

20 

Henry  Day 
A.  Morton 

300 
500 

305 
500 

I* 

1 

3 
5 

05 

301 
495 

95 

Credited 
Paid 

J.  A.  Wiles 
M.  Wei  ton 

COLLECTION    REGISTER 

It  is  customary  with  business  men  who  have  papers  to  collect,  especially  at  a  distance,  to  leave  them 
at  a  bank  for  collection.     When  papers  of  this  class  are  received  by  the  bank,  the  banker  should  see  that 

they  are  properly  indorsed,   as  follows:    "Pay  to  the  order  of Bank,  for  collection,  R.  C.  Martin." 

A  record  is  then  made  in  the  Collection  Register.  For  example:  R.  C.  Martin  has  a  note  made  by  Henry 
Day,  dated  May  2,  at  sixty  days,  for  $300.  He  wishes  it  collected  and  the  proceeds  placed  to  his  credit. 
He  takes  it  to  the  banker  who  records  it  in  the  Collection  Register,  entering  in  the  proper  column  the  date, 
name  of  maker,  number  of  note,  face,  time  to  run,  date  of  maturity,  interest,  if  any,  rate  of  collection  to 
be  charged,  etc.  See  form  on  next  page.  The  note  is  then  turned  over  to  the  Collection  Department. 
When  collected,  a  card  is  sent  to  R.  C.  Martin  requesting  him  to  bring  his  Pass  Book  to  the  bank.  He  ia 
then  given  credit  for  the  amount  collected,  less  the  charge  for  collecting.  This  appears  on  the  books  of 
the  bank  in  an  account  called  "Collections."  This  account  is  credited  for  all  sums  paid  to  the  bank 
for  collecting,  and  debited  for  all  sums  paid  by  the  bank  for  this  purpose.  The  record  on  the  Register 
is  then  completed  by  entering  the  amount  collected,  the  date,  and  whether  the  proceeds  were  paid 
to  R.  C.  Martin  or  placed  to  his  credit.  Entries  are  not  posted  from  this  book,  it  being  merely  a 
memorandum  book. 

DisooiLJisnr 


Date  of 

Dis- 
count 

Face  of  Paper 

and  Bills 

Dis.,  Dr.  when 

Posted 

Separately 

Total  Amount 

of  Bills  Dis., 
Dr.  when  Sev- 
eral are  Added 

L.  F. 

Am't 
of  Int. 
at  Ma- 
turity 

Am't  of 
Dis. 

Total  Amount 
of  Dis.  Cr. 

L.  F. 

Whom  or  What  Cr.  for  the 
Proceeds 

Am't  of 
L.  F.  Proceeds 

Payer's 
Name 

For  Whom 
Discounted 

19- 

July 
Aug. 

30 

1 

5 

26 
33 

6 

Q.  L. 

240 

500 
2500 

250 

O.  L. 

240 

2750 

75 

5 
15 

2 

17 

G.  L. 

317 

262 

C.  B. 

197 

495 
2485 

248 

H.  Wells 
D.  Smiley 

Cash 

H.  Wells 
R.  Toma 

M.  C.  Haley 

Maker 
D.  Smiley 

R.  Tilley 

ORGANIZATION  OF  CORPORATIONS 


20i 


REGISTER 


=^= 

Full 

Time  to 

Run 

Kind  of 
Paper, 
"Note" 

or 
"Draft " 

Rate 
of 
Int. 

When  Due 

Year 

Date  of 

Pap 

C.B. 
orL. 

Explain  How 

Paper 

a 

gg 

■-5 

X5 

- 

03 

o. 
< 

>> 

4 

4 

£ 

e 

3 

a 

>-3 

bb 
3 
< 

a 
a 

5 

0 

> 

o 
S5 

£ 

Q 

Collected 

Pay- 
ment 

Paid  and  General 
Remarks 

19 

Mar. 

Jan. 

5 
1 

60  Da. 
5  Mos. 

Note 
Note 

10 

1 

19 
19- 

305 
500 

May 
June 

5 
1 

C.B. 

290 
306 

Paid  J.  Dunn,  Col- 
lector' 

Paid  Cash 

DISCOUNT  REGISTER 

The  Discount  Register  has  the  same  relation  to  notes  and  drafts  discounted  that  the  Collection  Register 
has  to  those  collected.  When  persons  desire  to  raise  money  by  disposing  of  papers  not  yet  due,  they  often 
take  them  to  the  bank  and  have  them  discounted;  that  is,  they  sell  them  to  the  bank  for  what  the  banker 
is  willing  to  give.  The  banker  usually  deducts  an  amount  from  the  paper,  called  "discount."  There  is 
no  fixed  rate  of  discount,  but  the  amount  taken  off  varies  with  the  time  the  paper  has  yet  to  run,  the 
amount  or  face,  the  security  offered  for  its  payment,  the  condition  of  the  money  market,  etc.  In  cases 
where  the  note  bears  a  high  rate  of  interest,  the  bank  may  pay  the  full  face  value,  retaining  the  interest, 
when  collected,  for  its  compensation.  A  common  custom  is  to  compute  interest  on  the  amount  due  at 
maturity,  for  the  unexpired  time,  and  deduct  this  amount  from  the  sum  due  at  maturity,  paying  the  person 
having  the  note  discounted,  the  balance. 

The  Discount  Register  is  usually  a  long,  narrow  book,  having  special  columns  for  describing  the  paper, 
giving  its  date,  the  maker's  name,  date  of  maturity,  date  of  discount,  rate  of  interest  the  paper  bears,  the 
rate  of  discount,  the  amount  of  discount  (in  dollars),  for  whom  discounted,  and  the  disposition  of  the 
proceeds,  whether  paid  or  placed  to  the  credit  of  the  person.  This  book  is  used  as  an  auxiliary  book  or 
book  of  original  entry,  amounts  being  posted  directly  from  it  to  the  ledger.     See  form  on  previous  page. 

One  of  the  first  daily  duties  of  the  banker  each  morning  is  to  examine  the  Collection  and  Discount 
registers  and  see  what  papers  mature  on  that  day,  so  that  they  may  be  collected.  See  the  following 
form: 

REGISTER 


Full 

Time  to 

Run 

Kind  of 
Paper, 
"Note" 

or 
"Draft  " 

Rate 

of 

Int. 

When  Due 

Year 

Date  of 

Explain  How 

Date  oi 
Paper 

a 

s 

fa 

C 

S3 

s 

u 

a 
< 

33 

0 

c 

3 

1-3 

a 

3 
< 

a. 
do 

-J 
y 

O 

o 

6 
o 

a 

Collected 

Pay- 
ment 

Paid  and  General 
Remarks 

19 
July 
Mar. 

July 

30 
1 

11 

90  Da. 
6  Mo. 

30  Da. 

Note 
Draft 

X 
6 

X 

10 

1 

28 

19- 

2575 
250 

Sept. 
Aug. 

1 
11 

Rec'd  in  full 
Rec'd  in  fall 

JOURNAL,  LEDGER,  AND  TRIAL  BALANCE  BOOK 


R^/iyfctn/v  <M  ig 


TlTxTVuLayM^TUn/  {t  19 


Check*  In  Dtuil 


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2)0      488         lot 

j.33    att.»o  j/t, 


2Q7fr 


i& 


5000 


12? 


:*£>  |^>o>wTlfly  3. 1 9 _ 


Checks  in  Detail 


85*0     710 140. 


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10-15   H  50  HV5C 


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lourna".  Ledger,  and  Trial  Balance  Book. —  This  is  a  book  for  keeping  depositors'  accounts,  by  the  improved  method  known  as  tin 
3ton  Skeleton  Banking  System,"  which  has  recently  come  into  general  use  by  bankers. 

rhe  book  contains  columns  for  recording  a  synopsis  of  each  day's  business  with  the  various  depositors.  It  is  so  ruled  that  the 
er  can  tell  at  a  glance  the  number  and  amount  of  checks  paid,  the  sums  deposited,  and  the  depositor's  balance  for  each  day. 
ision  is  a^so  made  for  continuing  this  record  from  day  to  day,  without  transferring  the  names  of  the  depositors,  or  their  bank 
ices.     This  book  greatly  lessens  the  work  of  Bank  bookkeeping,  and  is  extensively  used. 

Fo  enable  the  student  to  understand  the  method  of  keeping  this  book,  several  page-forms  are  herewith  given,  accompanied  by  tn« 
sit  slips  for  the  several  days'  business,  and  detailed  explanations  of  the  entries.  Before  attempting  to  use  the  book  a  careful  study 
Id  be  given  to  these  entries  and  instructions. 

Explanation  of  the  Entries  for  November  1.— The  deposit,  $5,j00,  as  shown  by  H.  B.  Burton's  Deposit  Slip  is  entered  opposite  his 
}  in  the  third,  or  deposit,  column.  In  the  "Checks  In  Detail"  column  are  entered  the  several  amounts  of  all  his  checks  that 
been  presented  for  payment  or  deposit  on  November  1.  The  total  sum  of  these  checks,  $2,070.80,  is  entered  in  the  "  Total  Checks" 
nn,  and  the  difference  between  this  amount  and  the  total  deposits,  $5,000,  or  $2,923.20,  is  entered  in  the  "Balances"  column,  as 
tmount  that  stands  to  Burton's  credit  at  the  close  of  the  day. 

)unn's,  Hull's,  and  Paine's  balances  are  found  in  the  same  manner.  As  C.  H.  Wesley  drevr  no  checks,  his  balance  is  the  same  as 
otal  deposit,  $5,619.90. 

ror  an  explanation  of  the  footings,  see  instructions  under  November  2. 

Explanation  of  the  Entries  for  November  2.— On  this  day  H.  B.  Burton's  checks,  as  shown  by  the  'Checks  in  Detail''' 
nn,  amount  to  $3,995.50,  and  his  deposits  were  $5,096.25.  To  get  his  balance  for  this  day,  we  add  his  deposits  for  this  day,  $5,096.21* 
s  balance  for  the  day  before,  $2,t)23.20,  and  from  this  sum,  $8,019.45,  we  subtract  his  total  checks  for  November  2,  $3,995.5^ 
ng  $4,023.95  for  his  balance  at  the  close  of  November  2. 
Phe  other  balances  are  found  in  the  same  way. 
-ootings  Tests. —  The  correctness  of  the  "Total  Checks"  and  "Deposits"  column  is  tested  by  adding  to  the  footings  of  this 
:al  Checks"  column,  the  total  currency  deposits  for  the  day  as  shown  by  the  Cash  Book.  The  result  should  equal  the  total  ol! 
'Deposits"  column. 

Dhus  the  Total  Checks  for  November  2  amount  to  $19,744.75 ;  the  total  currency  received  by  deposits  as  shown  on  the  Cash  Book; 
is  date  is  $3,220 ;  the  sum  of  these,  or  $22,964.75,  equals  the  footings  of  the  "  Deposits,"  thus  indicating  the  correctness  of  these  columns 
fo  test  the  "Balances"  column,  we  add  the  currency  deposits  of  November  2,  $3,220,  to  the  footings  of  the  "Balances"  column  fo« 
mber  1  $15,980,  the  sum,  $19,200,  equals  the  footings  of  the  "  Balances  "  column  for  November  2.  These  tests  should  always  I" 
i  at  the  end  of  each  day. 

DEPOSIT  SLIPS  FOR  NOV.  1  AND  2 


Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
H.  B.  Burton, 

Nov.  1,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  1, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
W.  S.  Hull, 

Nov.  1, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  1, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
O.  H.  Wesley, 

Nov.  1,19- 

Checks: 

Checks: 

H.  B.  Burton     207 
270 
225 
W.S.Hull...     190.25 

260 

G.H- Paine..     140 

80 

30 

150 

Checks: 

H.  B.  Burton     100 

288 

J.  M.  Dunn...    189 

Checks: 
H.  B.  Burton     266.80 

400 

J.M.Dunn..       60 

10 

315 

W.  S.  Hull...       45 

25 

Checks: 
H.  B.  Burton     104 

216 
J.M.Dunn..     125 

263.90 
W.S.Hull....    149 

310 

252 

3,817 

2,621.80 

5,619.90 

3,592.25 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
H.  B.  Burton, 

Nov.  2, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  2,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
W.  S.  Hull, 

Nov.  2,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  2, 19- 

Checks: 
O.  H.  Wesley    500 

280 

475.50 
J.M.Dunn..       8525 

60 
W.S.Hull...     735 

580 
H.  3.  Burton     710 

640 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
C.  H.  Wesley, 

Nov.  2,  19- 

Currency 560 

Checks : 
J.M.Dunn..     275 

750.50 

505.25 
W.S.Hull...     640 

800 
G.H.  Paine..      30.50 

240 
O.  H.  Wesley     875 

420 

Checks : 
H.  B.  Burton       60 

540 
85.50 
W.  S.  Hull. . .       35 

480 
G.H.  Paine..       70.25 

500 
O.  H.  Wesley     675 

240 

Checks: 
G.  H.  Paine..     575 

450 

870.25 
J.M.Dunn..     810 

525  50 
H.  B.  Burton     800* 

630 

O.  H.  Wesley     385 

70 

Checks: 

W.S.Hull...     705 
400 
830.25 
G.H.  Paine.        70 

45.50 
J.M.Dunn..     675 

85.50 
H.  B.  Burton     150 
380 

5,096.25 

4,145.75 

6,315.75 

4,066.75 

3.341.85 

[202] 


JOURNAL, 

LEDGER 

> 

AND   TRIAL   BALANCE 

BOOK 

■.-■■'  1 

\maaAA^a)jw(\aj^.  h  , 1 9  _ 

^aaAaww^VIw,  5 ,    19  _ 

Checks 
in  Delail 

Total 
Checks 

Deposits 

Balances 

Checks 
In  Detail 

Total 
Checks 

Deposits 

Balances 

Checks 
in  Detail 

Total 

Checks 

Deposits 

Balances 

Balance  diia 
TremJtr  Column 

1 

ko     330    50°tf 
Do    i«go 

US    1000 

2715 

25 

1301 

3 

0  7  4 

TO 

in       '»« 

1»0  IS        » 1} 

!50     ■•    ;i; 

HO  10 

J  5 

JlM 

7T 

2 

TOP 

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The  entries  for  Nov.  3,  4,  and  5  require  no  further  explanation. 

Transferring  Balances. —  It  saves  the  bookkeeper  much  labor,  if  the  balances  of  the  various  deposits  can 
be  continued  through  the  book  without  the  necessity  of  re-writing  the  names.  This  is  accomplished  by  cutting 
off  a  portion  of  the  right-hand  margin  of  the  page.  When  the  page  is  turned,  the  names  are  still  visible. 
When  it  is  required  to  find  the  balances  for  November  8,  the  balances  for  the  previous  day  on  the  preceding  page 
may  be  made  visible  by  folding  over  the  margin  of  the  leaf,  along  the  ruled  line  immediately  preceding  the 
"Balances"  column. 


Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
H.  B.  Burton, 

Nov.  3,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  3, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
W.  S.  Hull, 

Nov.  3, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  3, 19 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
C.  H.  Wesley, 

Nov.  3,  19- 

Cu?rency 245 

Checks: 

J.  M.  Dunn..     215 
230 
W.S.Hull...     150.50 
G.H.  Paine..     140 

175.50 
O.  H.  Wesley    645 

1,801.00 

Checks : 

H.  B.  Burton      40 

130 

265 

W.  S.  Hull...     760.50 

G.H.  Paine..      75 

60.25 
O.  H.  Wesley     375 
-     495 

4,200.75 

Currency 4,000 

Checks : 

G.  H.  Paine..      20.50 
340 
425 
J.  M.  Dunn..     535.50 

695 

H.  B.  Burton    330 

480 

C.  H .  Wesley    630 

70 

Currency 1,100 

Checks : 
O.  H.  Wesley     85 

40.50 
450 
J.  M.  Dunn..     375 

225.50 
W.S.Hull...     272.50 
H.  B.  Burton  1,000 

3,548.50 

Currency  

Checks : 

W.S.Hull...     320 
485 
550 
G.H.  Paine..      25.25 

405 
J.  M.  Dunn..     390 

60.50 
H.  B.  Burton     500.25 

2,736.00 

7,526.00 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
E.  B.  Burton, 

Nov.  4, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  4, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
W.  S.  Hull, 

Nov.  4, 19- 

Currency 350 

Checks: 
G.H.  Paine..     425 

505.50 

355 
J.  M.  Dunn..     710 

275.25 
H.  B.  Burton  1,885 
O.  H.  Wesley    280 

320 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  4, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
C.  H.  Wesley, 

Nov.  4,  19- 

Currency    550 

Checks : 
J.  M.  Dunn..     325 

670 

205.50 
W.  S.  Hull... 

275.25 
G.H.  Paine..      70 

530 
0.  H.  Wesley  1,005 

Currency 200 

Checks: 
H.  B.  Burton    115 

280.25 
550 
W.S.Hull...     335 

685.50 
G.H.  Paine..     915 
O.  H.  Wesley    225.25 
85 

Checks: 
O.  H.  Wesley    205.25 

335 

630 
J.  M.  Dunn.. 

865.50 
W.  S.  Hull...     715 

870 
H.  B.  Burton      90 

845 

Currency 

Checks : 
W.S.Hull..     795 

405.25 
G.H.  Paine..     810 
730 
J.  M.  Dunn..      60 

820.25 
H.  B.  Burton    315 
480 

3,63075 

3,391.00 

4,555.75 

4,415.50 

4,980.75 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
H.  B.  Burton, 

Nov.  5. 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  5,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
W.  S.  Hull, 

Nov.  5, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  II.  Paine, 

Nov.  5, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
O.  H.  Wesley, 

Nov.  5,  19- 

Cuirency 1,200 

Checks: 
J.  M.  Dunn..     405 

600.25 
W  S.  Hull...     585.50 

610 
G.H.  Paine..     335.50 

60 
O.  H.  Wesley    695 

4,491.25 

Currency 1,400 

Checks : 
H.  B.  Burton    530 

725.50 
510.25 
W.  S.  Hull  ..  1.660 
G.H.  Paine..     615 
O.  H.  Wesley    475 

5,915.75 

Currency 650 

Checks: 
G.  H.  Paine.. 

210.50 
700 
J.  M.  Dunn..     515 

335.50 
H.  B.  Burton    575 
730 
O.  H.  Wesley    580 

4,296.00 

Currency 

Checks : 

C.  H.  Wesley    225 

550 

J.  M.  Dunn..      70 

640.50 
W.S.Hull...       90 

305.25 
H.  B.  Burton    775 

2,655.75 

Checks: 
W.  S.  Hull...  1,210 

835.5G 
G.H.  Paine..     295 
J.  M.  Dunn..     375 
H.  B.  Burton    430.50 

320 

3,466.08 

[203] 


JOURNAL,  LEDGER,  AND  TRIAL  BALANCE  BOOK 


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Explanation  for  November  8.— On  this  date  there  is  a  check  of  $1,500,  which  H.  B.  Burton  drew  and  had 
cashed  on  his  account.  As  Cash  is  credited  in  the  Cash  Book  for  this  withdrawal,  it  is  necessary  in  testing  the 
'Checks  in  Detail"  and  "Deposits"  column,  to  add  the  excess  of  cash  deposited  over  the  withdrawals,  instead 
of  the  total  currency  deposited  as  heretofore. 

Explanation  for  November  9. —  On  this  date  no  currency  was  either  deposited  or  paid  out,  hence  the  foot- 
ings of  the  "Checks  in  Detail  "  and  "Deposits"  columns  will  agree.  Also  the  footings  of  the  "Balance  "  column 
will  agree  with  the  footings  of  the  "Balance"  column  of  the  8th. 


Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
H.  B.  Burton, 

Nov.  8. 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  8, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
W.  S.  Hull, 

Nov.  8,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  8, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
C.  H.  Wesley, 

Nov.  8, 19- 

Checks: 

J.M.Dunn..     425 
300 
75  50 
W.S.Hull...      220' 
G.  H.  Paine..       65.25 

355 
C.  H.  Wesley     515 

3,155.75 

Currency 4,500 

Checks: 
H.  B.  Burton     250 

40.75 

325 

W.S.Hull...      780.50 

G.  H.  Paine..     305 

140 

C.  H.  Wesley     195 

6,536.25 

Currency 3,000 

Checks: 

G.H.  Paine..     500 
480 
40.25 
J.M.Dunn..      570 
H.  B.  Burton     7:i5.25 

80 
C.  H.  Wesley     740 

6,145.50 

Checks : 

C.  H.  Wesley     600 

660 

J  M.Dunn..       75.25 

40.50 

W.S.Hull...      525 

H.  B.  Burton     415 

510 

4,325  75 

Checks: 

W.S.Hull...     725 
810 
80.25 
G.H.  Paine..     705 
J.M.Dunn..      200.50 

25 
H.  B.  Burton     570 

3,115.75 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
H.  B.  Burton, 

Nov.  9, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
J.  M.  Dunn, 

Nov.  9,  19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
W.  S.  Hull, 

Nov.  9, 19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
G.  H.  Paine, 

Nov.  9,19- 

Deposited  With 
COMMERCIAL  BANK. 
For  Account  of 
O.  H.  Wesley, 

Nov.  9,  19- 

Checks: 
J.M.Dunn..     850 

770 
25.25 
W.S.Hull...     235 
G.  H.  Paine..     540 
C.  H.  Wesley       50.50 

400 

2.870.75 

Checks: 

H.  B.  Burton     700 
60 

95.25 
W.S.Hull...      R50 
G.  H.  Paine..     735.25 
O.  H.  Wesley     330 
75 

2,845.50 

Checks : 
G.H.  Paine..     550 

80.50 
J.  M   Dunn..      400 
H.  B.  Burton       65.25 
C.  H.  Wesley       70 
350 

Checks: 
C.  11.  Wesley     800 

70.25 

350 

J.  M.  Dunn..      475 

W.  S.  Hull...       60 

500 

H.  B.  Burton     720.25 

105 

Checks : 

W.S.Hull...     650 
35 
400 
G.H.  Paine..     17550 
J.M.Dunn..     360 
H.JB.  Burton     725.50 

1,515.75 

2,346.00 

3,080,50 

[204] 


JOURNAL,  LEDGER,  AND  TRIAL  BALANCE  BOOK 


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Explanation  for  November  10. —  On  this  date  more  currency  was -Withdrawn  than  was  deposited,  hence  in 
proving  the  checks  and  deposits  columns,  the  excess  withdrawn  must  be  added  to  the  footing  of  the  deposits 
column,  the  footing  agreeing  with  the  footing  of  the  checks  column. 

Explanation  for  November  12. — On  this  date  two  of  the  depositors,  Hull  and  Dunn,  have  closed  their  accounts, 

and  it  is  decided  to  drop  their  names  and  transfer  the  names  of  the  other  depositors  to  a  new  page.  For  this  reason  the 
margin  of  the  page  is  not  removed,  and  the  balances  for  the  day  are  entered  in  the  "Balance  and  Transfer  Column" 
instead  of  in  the  usual  Balance  column. 

As  H.  B.  Burton  has  drawn  checks  on  this  date  to  an  amount  greater  than  his  previous  balance,  and  as  he 
made  no  deposits  during  the  day,  his  account  is  overdrawn  to  the  amount  of  $35.55,  which  overdraft  is  entered  in  red 
ink  in  the  balance  and  transfer  column.  This  overdraft  must  be  subtracted  from  the  total  sum  of  the  balances  col- 
umn to  give  the  amount  due  the  depositors,  which  sum  is  $48,376.95. 

DEPOSIT  SLIPS   FOR  NOV.   10,  11,  AND  12. 


Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
H.  B.  Burton, 

Nov.  10, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
J,  M.  Dunn, 

Nov.  10, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
W.  S.  Hull, 

Nov.  10, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
G.  H.  Paine, 

Nov.  10, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
O.  H.  Wesley, 

Nov.  10, 19- 

Currency 

Checks: 

J.  M.  Dunn..     225 

750 

300 

W.S.Hull...      200.50 

G.  H.  Paine..     430 

335 

C.  H-  Wesley      70.50 

105 

Checks: 
H.  B.  Burton     800 

175.25 

80 

W.S.Hull...      550 

G.  H.  Paine..     630.50 

O.  H.  Wesley     370 

45 

2,650.75 

CTiecfrs: 

G.  H.  Paine..     350 

25 

J.  M.  Dunn..     600 

50.50 
H.  B.  Burton     480 
240 
C.  H.  Wesley      30.25 
400 

Checks: 
C.  H.  Wesley     700 

345 

100 
J.  M.  Dunn..     550 

475.25 
W.S.Hull...       60 
H.  B.  Burton     280 

500 

Checks: 
W.  S.  Hull...     475 

640.50 

120 
G.  H.  Paine,.      80 

300 
J.M.Dunn..     725 
H.  B.  Burton     160 

90 

2,416.00 

2,175.75 

3,010.25 

2.590.59 

Deposited  With 

COMMERCIAL  BANK. 

For  Account  of 

H.  B.  Burton, 

Nov.  11, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
J.  M.  Dunn, 

Nov.  11,19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Acer  ant  of 
W.  S.  Hull, 

Nov.  11, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
G.  H.  Paine, 

Nov.  11, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
O.  H.  Wesley, 

Nov.  11, 19- 

Cfiecks: 

J.M.Dunn..     225 

150 

370 

W.  S.  Hull...     730 

G-  B.  Paine..     410.25 

C.  H.  Wesley      35.25 

400 

Checks: 
H.  B.  Burton     825 

70.50 

W.S.Hull...     650 

G.  H.  Paine.     405 

O.  H.  Wesley    300 

60 

Checks: 

G.  H.  Paine..     540 
J.M.Dunn..      315.25 
H.  B.  Burton     400 

60  50 
C.  H.  Wesley    325"' 
260 

Checks: 
C.  H.  Wesley      85.50 

90 
J.M.Dunn..     110 

605.25 
W.  S.  Hull...     700 
H.  B.  Burton    280.25 
320 

Checks: 
W.  S.  Hull...     570 

840.2S 

90 

G.  H.  Paine.      280 

J.M.Dunn..     900 

H.  B.  Burton     115 

200 

3,010.50 

2,750.75 

3.52S  50 

3,541.00 

2,996.2? 

Deposited  With 

COMMERCIAL  BANK. 

For  Account  of 

J.  M.  Dunn, 

Nov.  12,19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
G.  H.  Paine, 

Nov.  12, 19- 

Deposited  With 
COMMERCIAL  BANK. 

For  Account  of 
O.  H.  Wesley, 

Nov,  12, 19- 

m 

Checks: 

H.  B.  Burton  1,000 

300 

G.  H.  Paine..     825 

70.25 
O.  Q.  Wesley    250 

480.25 

Checks: 

H.  B.  Burton     825 
C.  H.  Wesley     275.50 

60 
J.  M.Dunn..  14,836.60 

Checks: 

H.  B.  Burton     500 
G.  H.  Paine.      800 
W.S.Hull...  7,799 

16,997.10 

3,825.50 

200 


BANKING 


State  Bank  (Incorporated). —  The  following  opening  entry  is  a  form  for  an  incorporated  State  bank 
where  the  capital  stock  is  paid  up,  and  the  corporation  property  consists  of  a  number  of  items.  For  other 
conditions  and  methods  of  opening,  the  student  is  referred  to  the  instructions  under  "Corporations." 


CHICAGO,  ILL.,  DEC.  1,  19- 


C.  B. 


Cash  , 

Real  Estate 

Fixtures 

Mortgages  Receivable 

Bills  Receivable 
To  Capital  Stock 

For  the  nominal  amount  of  the  Capital  Stock  of  the  College  Bank,  incorpo- 
rated upon  the  basis  of  $100,000  Capital  Stock,  divided  into  1,000  shares  of  $100 
each,  and  issued  to  the  incorporators  and  associates  at  their  par  value  as 
follows : 

M.  J.  Pease,  100  shares,  Furnished  Real  Estate  $6,000,  Cash  $4,000. 
W.  S.  Hull,  50  shares,  Furnished  Real  Estate  $2,000,  Cash  $3,000. 
J.  E.  Martin,  300  shares,  Furnished  Mortgages  Receivable  $15,000,  Cash  $15,000. 
C.  E.  Howard,  250  shares,  Furnished  Mortgages  Receivable  $5,000.  Cash  $20,000. 
O.  L.  Miller,  300  shares,  Furnished  Bills  Receivable  $5,000,  Furniture  $2,000,  and 
Cash  $23,000. 


05,000 
8,000 
2,000 

20,000 
5,000 


100,000 


If  the  concern  is  a  mere  partnership  affair  and  not  incorporated,  the  opening  entry  will  not  differ 
materially  from  that  of  any  other  partnership  concern,  except  that  "Capital  Stock"  is  credited  with  the 
net  investment  instead  of  opening  different  stock  accounts  with  the  several  partners. 

If  a  single  proprietor  engages  in  the  private  banking  business,  his  investment  consisting  entirely  of 
cash,   the  following  entry  would  be  used: 

CHICAGO,  ILL.,  DEC.    1,  i9- 


C.  B. 


Cash 

To  Capital  Stock 

For  the  nominal  amount  of  the  Capital  Stock  of  the  Merchants  Bank,  organ- 
ized on  this  date  by  W.  S.  Hull,  in  accordance  with  the  laws  of  the  State  of 
Illinois,  with  a  capital  of  $100,000. 


100,000 


100,000 


Cash  Book. —  This  book  is  used  as  in  ordinary  business,  although  a  form  with  special  columns  for 
Discounts,  Deposits,  Bills  Discounted,  etc. ,  is  sometimes  used. 

The  following  form  illustrates  the  use  of  a  Cash  Book  for  an  ordinary  banking  business: 


CASH 

BOOK 

. 

July  10,  19- 

July  10,  19- 

19- 

M.  J.  Pease  on  Stock  acct. 
W.  S.  Hull  "      ;' 

C.  E.  Howard     " 
O.  L.  Miller  "     " 

D.  Jacobs           Dep.  " 
W.  J.  Sherman            " 

E.  P.  Snyder 

Paul  Price                    " 
A.  A.  Anderson            " 

3,000 

1,000 

5,000 

6,000 

1,000 

500 

100 

600 

1,000 

19- 
July 

12 

Office    Fixtures,  Globe 

Mfg.  Co. 
Office  F  i  x  t  u  r  es,  Hall 

Safe  &  Lock  Co. 

2,000 
3,000 

Juiy    j  li 

I. 

Cash  A.  A.  Anderson 

1,000 

BANKING 
DRAFT   REGISTER 


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This  book  is  used  for  recording  the  various  drafts  drawn  on  other  banks.  Usually  a  different  book  is 
used  for  each  bank;  but  if  desirable,  one  book  may  be  used,  several  pages  being  allotted  to  each  bank 
drawn  upon,  the  number  depending  upon  the  amount  of  business  done  with  the  several  banks.  As  soon  as 
a  credit  has  been  opened  with  a  bank  and  drafts  are  drawn,  they  are  recorded  as  shown  in  the  accompany- 
ing form. 

At  the  close  of  each  day's  business  the  draft  register  is  ruled  with  a  single  red  ink  ruling  and  the 
amounts  of  the  various  columns  are  transferred  to  the  extension  column,  from  which  they  are  transferred 
to  the  Journal  under  the  proper  heading.  The  items  are  then  posted  to  their  respective  accounts  in  the 
Ledger. 

Some  banks  post  direct  from  the  Draft  Register  to  the  Ledger,  but  it  is  preferable  to  transfer  all  items 
from  the  books  of  original  entry  to  the  Journal,  as  the  Journal  will  then  show  a  complete  history  of  the 
day's  business,  and  enables  an  auditor  or  examiner  to  ascertain  much  more  easily  just  what  has  been  done. 

Certified  Check  Register. — Part  of  the  duty  of  the  cashier  of  a  bank  is  to  certify  checks,  except 
when  in  the  case  of  large  institutions  this  duty  devolves  upon  the  paying  teller  or  some  other  bank 
clerk  to  whom  the  authority  to  certify  checks  has  been  delegated.  Great  care  should  be  exercised  by  the 
person  certifying  the  check,  to  see  that  the  depositor  has  the  amount  actually  on  deposit  for  which  the 
check  calls.  The  revised  statute,  according  to  Section  5,208,  makes  it  an  offence  "for  any  officer,  clerk, 
or  agent  of  any  national  banking  association  to  certify  any  check  drawn  upon  the  association,  unless  the 
depositor  or  party  drawing  the  check  has  on  deposit  v  ith  the  association  at  the  time  such  check  is  certified 
an  amount  of  money  equal  to  the  amount  specified  in  such  check."  It  is  right  that  the  law  with  reference 
to  the  certification  of  checks  should  be  so  strict,  and  the  sentence  for  violating  this  law  is  to  place  the  bank 
in  the  hands  of  a  receiver,  and  the  punishment  of  the  officer  by  a  fine  of  not  more  than  $5,000,  or  imprison- 
ment for  not  more  than  five  years,  or  both,  at  the  discretion  of  the  court. 

Every  bank  keeps  some  form  of  record  in  which  is  recorded  the  date  of  every  check  certified,  to 
whose  order  the  check  is  payable,  the  amount  of  the  check,  and  the  date  of  payment.  When  a  check  is 
certified  it  should  be  immediately  charged  to  the  account  of  the  maker. 

The  items  are  transferred  from  the  Certified  Check  Register  to  the  Bank  Journal  each  night  and 
are  posted  to  the  credit  side  of  the  Certified  Check  account  of  the  General  Ledger.  When  »  check 
that  has  been  certified  comes  in  for  payment,  it  is  debited  through  the  Journal  to  the  Certified  Check 
account  in  the  General  Ledger,  and  is  marked  "paid"  in  the  Certified  Check  Register. 

It  is  customary  for  most  banks  to  pay  certified  checks  as  they  come  in  during  the  day,  just  the 
same  as  any  other  check  would  be  paid,  but  at  night,  in  place  of  charging  them  to  the  account  through  the 
Daily  Deposit  Ledger,  the  certified  checks  are  sorted  by  themselves  and  properly  recorded  in  the  Journal. 

The  reason  why  these  checks  are  not  charged  to  the  depositors'  account  when  they  come  in.  is 
because  the  depositors'  account  should  invariably  be  charged  with  the  amount  of  the  check  at  the  time  it 
is  certified;  the  reason  for  which  should  be  very  plain  to  the  thinking  student. 


208 


BANKING 


Certificates  of  Deposit — A  Certificate  or  Deposit  is  a  writttn  form,  certifying  that  some 
person  has  deposited  a  certain  sum  of  money,  payable  to  the  order  of  himself,  or  to  some  one  else, 
whose  name  must  be  specified  on  the  face  of  the  certificate.  Certificates  of  Deposit  are  made  payable 
on  demand,  so  many  days  after  date,  so  many  months  after  date,  or  at  some  other  specified  time. 

A  Certificate  of  Deposit  is  not  subject  to  check,  and  should  so  state  on  its  face. 

A  Certificate  of  Deposit  may  draw  interest  or  not,  according  to  the  conditions  expressed  in  the 
certificate.  Many  banks  prefer  to  issue  Certificates  of  Deposit  for  funds  to  be  left  with  them  at  interest  for 
any  length  of  time,  as  the  bank  is  then  able  to  look  over  its  Certificate  of  Deposit  Register,  and  know,  so 
far  as  the  Certificates  of  Deposit  are  concerned,  exactly  what  amount  of  money  they  may  be  called  upon  to 
pay  at  a  certain  specified  time.  The  fact  that  money  cannot  be  drawn  on  Certificates  of  Deposit  makes  them 
inconvenient  for  ordinary  commercial  purposes,  but  where  a  person  has  surplus  funds  that  he  wishes  cared 
for   at  interest,  for  a  few  months,  or  a  longer  time,  the  Certificate  of  Deposit  will  be  found  very  convenient. 

If  the  one  obtaining  the  Certificate  of  Deposit  should  have  it  made  payable  to  himself,  or  to  his 
order,  he  should  leave  his  own  signature  at  the  bank  at  the  time  of  obtaining  the  Certificate  of  Deposit, 
but  if  the  Certificate  of  Deposit  is  payable  to  the  order  of  some  one  else,  this  is  not  necessary. 

A  Certificate  of  Deposit  should  never  be  issued  by  a  bank  to  an  individual  without  the  bank 
obtaining  a  receipt  for  the  Certificate  of  Deposit.  A  form  should  be  filled  out  by  the  one  desiring  the 
Certificate  of  Deposit,  showing  exactly  to  whose  order  ths  Certificate  of  Deposit  is  to  be  payable,  the 
amount  for  which  it  is  issued,  the  time  to  run,  and  any  other  details  in  connection  with  it,  as  well  as 
the  name  of  the  person  wishing  the  Certificate  of  Deposit;  just  as  much  so  as  in  the  receipt  for  ordinary 
deposits,  or  for  the  issuance  of  Bank  Drafts. 

If  a  check  is  given  in  payment  for  a  Certificate  of  Deposit,  the  check  should  so  state  on  its  face. 

When   Certificates  of  Deposit  are  paid  by  the  bank,  they  are  filed  away  for  further  reference. 

Certificate  of  Deposit  Register. — In  most  banks,  and  especially  where  the  Certificates  are 
made  in  a  tablet,  it  is  necessary  to  keep  a  record  of  all  Certificates  of  Deposit  issued,  in  a  book  called  a 
Certificate  of  Deposit  Register.  This  book  is  ruled  so  as  to  show  the  date  of  issuance,  the  number,  to 
whose  order  payable,  when  due,  the  amount,  when  paid,  and  the  amount  paid.  The  object  of  having 
a  special  column  for  the  amount  paid,  is  because  that  sometimes  only  a  part  of  a  Certificate  of  Deposit  is 
paid,  and  a  new  Certificate  is  issued  for  the  unpaid  portion,  and  also  because  in  the  case  of  the  Certificate 
of  Deposit  bearing  interest,  the  amount  paid  would  be  larger  than  the  amount  for  which  the  certificate  was 
issued  by  the  amount  of  interest  accrued. 

Certificates  of  Deposit  should  be  immediately  entered  in  the  Certificate  of  Deposit  Register  at 
the  time  of  issuance,  and  at  night  all  such  entries  are  transferred  from  the  Certificate  of  Deposit  Register  to 
the  Journal,  and  posted  from  the  Journal  to  the  credit  side  of  the  Ledger  account. 

BANK  JOURNAL   CR.f  Tuesday 


DEPOSITS 


Bal.  fwd. 
O.  C.  Dailey 
O.  B.  Mills 
O.  E.  Pratt 
W.  B.  Brown 
A.  E.  Dailey 


9   6 


L.  F. 


GENERAL  LEDGER 

ITEMS 

Bills  Rec. 

Reg.  No.  26 

1 

0 

0 

Int.  &  Dis. 

Reg.  No.  26 

8 

Collection 

Reg.  No.  42 

2 

5 

Certified  Cks. 

Reg.  No.  91 

1 

0 

0 

Cert,  of  Dep. 

Reg.  No.  38 

4 

0 

0 

Sundries 

1st  Nat 'IBank 

3 

0 

0 

Chem.  Nat'l  Bk. 

9 

6 

4 

2 

1 

0 

5 

4 

5 

2 

5 

4 

3 

7 

3 

0 

8 

9 

6 

4 

4 

7 

8 

5 

4 

2 

1 

BANKING 


209 


When  a  Certificate  of  Deposit  is  paid,  an  entry  is  made  in  the  Bank  Journal  directly  from  the 
Certificate  of  Deposit  itself,  after  which  the  payment  is  properly  recorded  in  the  Certificate  of  Deposit 
Register,  the  amount  being  correctly  posted  from  the  Journal  to  the  debit  side  of  the  Ledger  account. 

CASH  BOOK  OR  JOURNAL 

As  everything  pertaining  to  a  bank  is  called  Cash,  the  principal  book  from  which  the  various 
items  are  posted  to  the  General  Ledger  is  called  the  Bank  Journal.  No  specific  information  can  be  given 
with  reference  to  this  book,  as  it  will  vary  greatly  according  to  the  conditions  and  size  of  the  bank. 
Nearly  every  bank  has  a  specially  ruled  form  for  its  Journal  work,  but  the  principle  involved  is  identically 
the  same  in  each  bank.  The  form  given  herewith  is  suitable  for  an  ordinary  sized  banking  institution. 
The  printed  headings  would  vary  according  to  the  nature  of  its  business. 

The  headings  given  in  the  accompanying  form  are  such  as  would  be  found  in  any  Bank  Jour- 
nal, and  the  additional  headings  will  be  very  quickly  understood  by  the  student  when  he  reaches  the  busi- 
ness office. 

All  amounts  received  on  deposit  are  entered  in  the  column  for  that  purpose;  and  all  amounts 
affecting  the  credit  side  of  depositors  account  must  bz  entered  in  the  Deposits  column.  The  footing  of 
this  column  is  used  at  the  close  of  each  day's  business  in  connection  with  the  Sundry  and  other  columns  of 
the  Cash  Journal,  to  test  the  correctness  of  the  Cash  balance.  All  amounts  paid  out  on  checks  or  any 
amount  affecting  the  debit  side  of  the  Depositors'  account  must  be  entered  in  the  column  for  that  purpose, 
and  the  total  of  this  column  is  used  for  determining  the  correctness  of  the  Cash  Balance. 

All  items  of  the  daily  business  are  transferred  from  the  original  books  of  entry  to  the  Bank 
Journal  and  are  then  posted  from  the  Bank  Journal  to  the  General  Ledger,  with  the  exception  of  the  checks 
and  drafts.  Items  affecting  the  credit  side  of  the  Depositors'  accounts,  such  as  deposits,  credits  for  drafts, 
collections,  etc.,  are  entered  directly  in  the  Deposits  column  from  the  Deposit  Ticket,  or  other  vouchers; 
while  items  affecting  the  debit  side  of  the  account,  such  as  checks,  drafts  accepted  and  charged  to 
account,  etc.,  are  entered  directly  in  the  column  provided  for  that  purpose  from  the  vouchers  themselves. 
The  items  of  the  Deposits  and  Check  column  are  not  posted,  but  the  total  is  used  for  verifying  the  Cash 
Balance,  and  also  to  verify  the  total  checks  and  the  total  deposits,  as  recorded  in  the  individual  ledger. 

The  Cash  Journal  should  be  ruled  and  closed  at  the  end  of  each  day's  business,  and  the  Cash  Balance 
transferred  to  the  following  page. 

Sometimes  an  ordinary  Cash  Book  is  used  in  small  banks  for  recording  these  transactions,  and  the 
method  of  using  it  would  not  materially  differ  from  that  with  which  you  are  already  familiar. 

BANK  JOURNAL  DR.,  July   20,    19 


CHECKS 


O.  W.  Pratt 

$100.00    300.00 

B.  B   Burton 

$300.00    200.00 

A.  M.  Brown 
W.  B.  Brown 
O.  E.  Mills 
A.  B.  Custer 


R.  Buider 


3.40    2.10 


4 

0 

0 

5 

0 

0 

G 

4 

2 

1 

0 

0 

3 

2 

0 

1 

0 

0 
5 

5 

5    5   0 


2   0   6   7   5   0 


L.  F. 


GENERAL  LEDGER  ITEMS 


Bills  Rec. 

Reg.  No.  42 

1 

2 

4 

G 

Int.  &  Dis. 

Reg.  No.  42 

1 

2 

4 

Collections 

Reg.  No.  43 

3 

5 

Certified  Cks. 

Reg.  No.  128 

6 

0 

1 

0 

5 

Cert,  of  Dep. 

Reg.  No.  346 

7 

0 

3 

Sundries 

Chem.  Nat'l  Bk. 

9 

6 

0 

0 

1st  Nat'l  Bank 

7 

0 

0 

0 

1 

9 

1 

5 

1 

6 

4 

2 

0 

6 

7 

5 

0 

Bal.  on  Hand 

4 
4 

2 

6 

G 

3 

5 

0 

7 

4 

7 

8 

5 

4 

2 

1 

210 


BANKING 


PAY  ROLL. 

COLLEGE   PRODUCE  CO. 

BATTLE  CREEK,  MICH. 


How  Checks  are  Certified. — The  customary  way  of  certifying  checks  is  to  write  "Certified," 
together  with  the  date  and  the  signature  of  the  bank  official  certifying  such  check.  Another  form  is  to 
write  the  word  "good,"  together  with  the  date  and  proper  signature.  Some  banks  write  across  the  face 
of  the  check  "Good  when  properly  endorsed,"   together  with  the  date  and  the  signature  of  the  officer. 

When  presenting  checks  to  the  bank  for  certification,  it  is  not  necessary  that  the  holder  of  the 
check  make  inquiry  as  to  whether  the  bank  officer  who  certifies  it  has  the  proper  authority  or  not,  because 
the  bank  would  be  holding  for  the  amount  of  the  check  if  any  member  of  the  bank  force  certified  it;  but,  of 
course  any  honest  bank  clerk  would  refer  the  one  presenting  the  check  for  certification  to  the  proper 
official. 

A  bank  cannot  be  compelled  to  certify  a  check.  If,  for  any  reason,  the  banker  prefers  to  do  so, 
he  may  pay  the  check  rather  than  certify  it,  and  most  banks  rightly  refuse  to  certify  checks  for  small 
amounts.     It  is  better  for  the  bank  and  for  the  depositor  to  obtain  some  other  form  of  paper  from  the  bank. 

Money  for  Pay  Roll — Where  a  bank  has  among  its  depositors  a 
large  number  of  manufacturing  institutions,  the  bank  is  generally  willing 
to  arrange  money  in  certain  forms,  or  to  pay  the  amount  of  a  check  in 
certain  denominations  for  the  convenience  of  the  depositors  in  paying 
their  employees  their  wages.  Many  banks  have  a  specially  prepared 
form  which  they  furnish  to  their  customers.  These  forms  are  so  ruled 
as  to  indicate  the  name  of  the  firm  desiring  the  money,  the  date,  the  total 
amount  required,  and  the  various  denominations.  This  is  convenient  both 
to  the  bank  and  to  the  customers.  These  blank  forms  are  retained  by  the 
paying  teller,  and  become  one  of  his  vouchers  exactly  the  same  as  a 
check.  Some  depositors  write  their  checks  in  the  ordinary  form  for  the 
amount  required,  and  then  on  the  back  of  the  check  make  a  list  of  the 
various  denominations  desired.  Another  plan  is  to  furnish  the  paying 
teller  a  separate  slip  with  denominations  noted.  All  these  methods 
employ  practically  the  same  form  for  indicating  the  required  denomina- 
tions, but  use  the  form  in  different  ways.     (See  accompanying  form.) 

Unpaid  Commercial  Paper. — As  an  office  employee,  you  should 
take  great  care  to  refer  to  the  business  manager  of  the  concern  where  you 
are  employed,  all  unpaid  commercial  paper  before  resorting  to  extreme  measures.  If  you  give  paper  to  a 
Notary  Public  to  protest,  it  is  a  safe  plan  for  you  to  obtain  a  receipt  from  the  Notary  Public  for  such  paper, 
or  to  make  a  record  of  such  paper  in  some  small  book.  No  special  ruling  would  be  necessary  in  such  a 
book  as  it  would  be  merely  a  record  to  enable  you  to  determine  where  such  commercial  papers  were. 

Bills  Rediscounted. — Sometimes  when  a  bank  is  in  need  of  ready  money  it  will  discount  the 
notes  receivable  it  holds,  to  another  bank,  for  ready  money.  The  notes  thus  hypothecated  are  spoken 
of  as  "Bills  Rediscounted." 


TENS 
FIVES 
ONES 
HALVES 
QUARTERS 
DIMES     . 
NICKELS    . 
CENTS     . 

TOTAL 

PART   II 


OF  BOOKKEEPING  AND  BUSINESS  IN  GENERAL 


CHAPTER  I.  —Principles  and  Classifications 

Business. — A  business  is  any  commercial  enterprise  entered  into  by  an  individual,  a  firm,  or  a  corporation  for 
purposes  of  pecuniary  gain. 

Bookkeeping. — Bookkeeping  is  the  art  of  making  permanent  and  properly  classified  records  of  all  facts  that 
affect  the  finances  of  a  business. 

Bookkeeper,  Accountant,  Auditor. — There  is  so  much  misuse  of  the  words  bookkeeper,  accountant,  and  auditor, 
that  it  seems  well  at  this  time  to  point  out  broadly  the  distinction.  The  bookkeeper  is  the  person  that  has  charge 
and  custody  of  the  books  and  records,  and  makes  the  entries  in  the  books  in  accordance  with  the  accountant's  out- 
line and  scheme  for  the  accounts,  just  as  the  carpenter  follows  the  architect's  design. 

The  central  thought  of  accountant  is  that  of  construction  and  interpretation. 

The  central  thought  of  auditor  is  that  of  verification,  which  necessarily  includes  interpretation. 

Financial  Quantities. — Bookkeeping  deals  with  the  measurements  and  the  adjustment  of  four  general  classes 
of  financial  quantities. 

1.  Resources,  including  all  property,  debts  receivable,  or  other  things  of  value  belonging  to  the  business. 

2.  Liabilities,  including  all  debts  of  whatever  character,  for  the  payment  of  which  the  business  is  liable. 

3.  Gains  or  profits,  including  all  increases  in  the  proprietor's  resources  arising  from  any  transaction  or  series 
of  transactions. 

4.  Losses,  including  all  diminishments  in  the  proprietor's  resources,  arising  from  any  transaction  or  series 
of  transactions. 

The  Unit  of  Measurement  for  the  Financial  Quantities  of  bookkeeping  consists  of  the  legal  monetary  units 
or  "money  of  account"  of  the  country  in  which  the  business  is  conducted. 

Thus,  in  the  United  States  and  Canada  the  money  of  account  is  dollars  and  cents,  while  in  Great  Britain  it 

is  pounds,  shillings,  and  pence. 

Note — Sometimes  an  extensive  business  is  conducted  by  means  of  one  principal  establishment  (Main  House)  and  several  sub- 
ordinate establishments  (Branch  Houses,)  situated  in  different  countries.  In  this  case  the  money  of  account  for  each  of  the  Branch 
Houses  would  be  that  of  the  country  in  which  the  Main  House  is  situated. 

Transaction. — A  Business  Transaction  is  any  arrangement  entered  into  by  two  or  more  persons,  firms,  or 
corporations,  through  the  terms  of  which  the  financial  interest  of  each  party  is  affected. 

Twofold  Character. — Every  transaction  is  twofold  in  its  nature,  and  opposite  in  its  effects  as  to  the  parties. 
Thus,  in  any  dealing  in  which  we  receive  one  kind  of  property  or  resource,  we  part  with,  or  agree  to  part  with, 
its  equivalent  in  the  same  or  another  kind  of  property,  or  resource;  what  one  party  to  the  transaction  gives, 
the  other  receives. 

Debit  and  Credit. — To  express  the  twofold  nature,  or  effect,  of  a  transaction,  recourse  is  had  to  the  terms 
Debit  and  Credit. 

A  Debit  is  a  charge,  or  a  record  against. 

A  Credit  is  an  allowance,  or  a  record  in  favor  of. 

Entry.— An  Entry  is  any  formal  record  of  a  transaction,  together  with  the  debits  and  credits  involved  in  it. 

Account. — An  Account  is  a  systematic  arrangement  of  the  debits  and  credits  which  pertain  to  any  one  person, 
firm,  kind  of  property,  or  source  of  gain  or  loss.  The  accounts  of  a  business  usually  appear  in  the  Ledger  although 
certain  accounts  are  often  kept  in  special  books. 

If  both  the  debits  and  the  credits  arising  from  each  transaction  are  entered  equal  in  amount,  the  system  is 
called  Double  Entry.     If  the  debits  alone,  or  the  credits  alone,  are  entered,  the  system  is  called  Single  Entry. 

Double  Entry  Bookkeeping. — Double  Entry  Bookkeeping  proceeds  upon  the  principle  that  the  debits  and 
the  credits  arising  from  any  transaction  are  equal  in  amount,  and,  hence,  that  the  total  sum  of  the  debits  in  the 
Ledger  should  equal  the  total  sum  of  the  credits. 

Classification  of  Accounts. — By  the  Classification  of  Accounts  is  meant  the  forming  of  ordinary  ledger  accounts 
into  groups  or  classes  with  respect  to  some  general  difference  in  the  nature  of  the  accounts  comprising  the  dif- 
ferent groups.  Various  systems  of  classification  have  been  suggested  by  different  authors,  the  more  important  of 
which  we  give  here.     For  a  more  complete  discussion  of  Classification  of  Accounts,  see  pages  35  and  36. 

Classification  No.  1. — First  with  respect  to  the  nature  of  the  quantity  measured,  accounts  have  been  divided 
into: 

1.  Real  Accounts,  or  those  representing  actual  resources  or  liabilities,  as  Cash,  Bills  Payable,  Bills  Receiva- 
ble, and  all  Personal  accounts. 

2.  Nominal  Accounts,  or  those  that  stand  for  different  sources  of  loss  or  gain,  as  Expense,  Insurance,  Mer- 
chandise, Interest,  etc. 

These  groups  have  also  been  called  respectively,  Real  Accounts  and  Representative  Accounts.  . 

[2111 


212  PRINCIPLES  AND  CLASSIFICATIONS 

Classification  No.  2. — With  regard  to  their  relation  to  the  business,  accounts  have  been  divided  into: 

1.  Personal  Accounts,  or  those  that  represent  all  persons  who  owe,  or  are  owed  by  the  business,  "on  account." 
These  accounts  really  have  a  twofold  existence.  Thus,  our  account  with  John  Smith  is  the  same  as  John  Smith's 
account  with  us,  except  that  the  sides  are  reversed,  our  debits  being  his  credits  and  vice  versa. 

Personal  Accounts  have  been  grouped  into: 

(a)  Accounts  Receivable,  or  those  that  represent  resources;  and 

(b)  Accounts  Payable,  or  those  that'  represent  liabilities. 

2.  Proprietary  Accounts,  or  all  accounts  other  than  personal,  and  for  which  there  is  no  corresponding  account 
on  another  person's  books. 

Proprietary  Accounts  have  also  been  called  "Impersonal,"  "Non -personal,"  "Representative,"  "General," 
and  the  like. 

Classification  No.  3. — With'  respect  both  to  their  nature  and  to  their  relation  to  the  business,  accounts  have 
been  classified  into: 

1.  Property  Accounts,  or  those  that  represent  the  cash,  effects,  chattels,  etc.,  belonging  to  the  business,  as 
Cash,   Real  Estate,  Merchandise,  Store  Fixtures,  etc. 

2.  Personal  Accounts,  or  all  accounts  with  persons. 

3.  Auxiliary  Accounts,  or  all  accounts  formed  for  the  purpose  of  exhibiting  such  gains  and  losses  as  are  not 
shown  by  the  property  accounts,  also  those  used  merely  for  convenience  in  showing  the  condition  of  the  business, 
as  the  Loss  and  Gain  account,  Expense,  Proprietor's  Stock  account,  Interest  and  Discount,  etc. 

Special  Classes. — Accounts  have  been  further  grouped  into: 

1.  Current  or  Running  Accounts,  or  itemized  accounts  in  which  the  items  occur  in  the  order  of  their  dates. 
Such  accounts  are  not  usually  ruled  up,  but  are  left  open,  and  in  finding  their  balance,  the  date  on  which  the 
various  items  are  entered  is  taken  into  consideration. 

Current  Accounts  are  usually  either  consignment  accounts  or  personal  accounts. 

2.  Summary  Accounts,  or  those  in  which  each  item  is  an  aggregate  that  is  shown  by  the  balance  of  some 
other  account. 

3.  Capital  Accounts,  or  those  formed  for  the  purpose  of  showing  all  or  a  part  of  the  investment,  either  at 
the  beginning  or  at  the  close  of  the  business.  Examples:  The  proprietor's  Stock  Account,  also  the  Franchise, 
and  the  Surplus  Account  in  Corporation  Books. 

Remark — The  author  does  not  think  it  incumbent  upon  the  student  to  adopt  any  of  the  above  described  classifications  to  the 
exclusion  of  the  others;  but  it  is  well  for  him  to  be  familiar  with  them  all,  in  order  that  he  may  understand  what  is  meant  by  financial 
writers  when  they  employ  them. 

Subdivision  of  Accounts. — By  the  Subdivision  of  an  Account  is  meant  the  various  divisions,  or  parts,  into 
which  a  general  account  may  be  divided,  to  meet  the  special  bookkeeping  requirements  of  a  given  business. 

For  illustration:  It  may  be  found  desirable  to  keep  the  Merchandise  account  under  a  number  £>{  divisions, 
each  representing  a  special  department  or  a  particular  class  of  goods,  as  the  Produce  account,  Coal  account,  Farm 
Machinery  account,  etc.  In  an  extensive  manufacturing  business,  or  in  department  stores  it  is  often  necessary  thus 
to  subdivide  the  Merchandise  account  into  many  divisions.  This  subdivision  of  the  Merchandise  account  is  well 
illustrated  in  the  Voucher  System  as  given  in  Part   1. 

The  Expense  Account  is  often  similarly  divided  into  Rent  account,  Fuel  account,  Employment  account,  etc. 

The  number  and  character  of  the  accounts  that  are  kept  will  depend  altogether  upon  the  peculiarities  of  the 
business,  and  upon  the  particularity  that  is  desired  in  exhibiting  the  various  sources  of  losses  and  gains,  resources 
and  liabilities. 

Of  course  no  general  enumeration  of  all  the  accounts  that  might  be  kept  is  necessary,  or  even  possible. 
In  drafting  a  set  of  accounts  to  be  used  in  a  given  business,  the  capable  accountant  will  be  unhampered  by,  any 
conventional  rules.  He  should  consult  the  proprietors  as  to  what  results  they  wish  the  books  to  exhibit,  and 
then  open  whatever  accounts  seem  best  adapted  to  show  these  results  clearly. 

It  should  constantly  be  borne  in  mind  that  accounting  is  a  flexible  art,  and  that  the  number  and  character 
of  the  accounts  that  are  best  adapted  to  a  business,  also  the  special  devices  to  be  employed  in  keeping  them,  must 
depend  entirely  upon  the  nature  and  requirements  of  the  business,  and  the  facilities  at  the  hands  of  the  book- 
keeper. 


CHAPTER  II— Books  of  Record 

Three  Processes. — Double  Entry  Bookkeeping  as  a  whole  comprises  three  distinct  and  fundamental  processes: 

1.  The  preparation  of  a  plain,  complete,  and  readily  accessible  record  of  each  separate  business  transaction. 

2.  The  determination  of  the  debits  and  credits  arising  from  each  transaction,  and  the  assemblage  of  these 
under  their  appropriate  accounts  in  the  Ledger. 

3.  The  periodical  comparison  of  the  balances  of  the  various  accounts,  with  a  view,  first,  to  test  the  ac- 
curacy of  the  books,  and  second,  to  set  forth  clearly  and  in  detail,  the  amounts  and  sources  of  all  losses  and 
gains  during  a  given  period,  and  the  condition  of  the  business  as  to  the  resources  and  liabilities  at  the  close  of 
that  period. 

Primitive  Bookkeeping. — In  the  early  history  of  bookkeeping  but  two  general  books  of  record  were  used: 
(1)  A  book  conveniently  arranged  for  recording  transactions,  and  known  as  a  Day  Book  from  the  circumstance 
that  it  was  used  each  day;  and  (2),  a  Ledger  (so-called  from  an  old  Hollandish  word  meaning  to  lie,  to  rest,  in  a 
permanent  place),  a  book  in  which  the  records  of  the  transactions  were  from  time  to  time  classified  and  arranged 
for  permanent  reference. 


BOOKS  OF  RECORD 


213 


The  origin  of  a  "double  entry"  for  corresponding  debits  and  credits  is  unknown,  but  the  custom  is,  without 
doubt,  a  very  ancient  one. 

About  a  century  ago,  an  intermediate  book,  between  Day  Book  and  Ledger,  was  introduced,  the  purpose  of 
which  was  the  preliminary  arrangement  of  the  debits  and  credits  with  a  view  to  facilitate  posting  to  the  Ledger. 
This  book  was  called  the  Journal,  meaning  "daily"  or  "diurnal,"  from  the  French  jour,  a  day.  These  books  com- 
prised the  "bookkeeper's  trinity"  of  "Day  Book,  Journal,  and  Ledger,"  which  for  many  years  constituted  the  only 
books  kept  in  most  kinds  of  business;  and  indeed  they  are  still  the  only  books  used  in  some  conservative  establishments. 

As  these  three  books  constitute  the  essential  and  fundamental  books  of  record,  out  of  which  all  of  the  many 
modern  special  books  have  been  evolved,  it  is  thought  best  to  present  here  a  short  description  of  each,  as  it  was 
formerly  used. 

Day  Book.— As  before  stated,  this  book  was  used  merely  to  present  a  history  of  the  transaction.  It  contained 
a  date  column  and  a  single  money  column,  though  sometimes  two  money  columns  were  used,  one  for  the  several 
items  of  a  purchase,  and  another  for  the  extensions. 

The  following  forms  illustrate  both  forms  of  this  book  and    the    manner    of    recording  the  transactions 


Single  Column  Day  Book 


Chicago,  111.,  Jan.  16,  19„ 


Sold  to  C.  H.  Day  on  % 

7  tons  Massillon  Coal        $2.00 
3  cords  Oak  Wood  4.00 


$14.00 
12.00 


-17— 


Settled  my  account  with  Jennings  &  Co.  to  date, 
giving  them  my  note  at  30  days. 

—19— 
Bo't  of  Miller  &  Sons  on  %  at  60  days 
Mdse  as  per  Inv.  No.  18 


26 


75 


121 


00 


25 


40 


Double  Column  Day  Book 


Chicago,  III.,  Jan.   16,  iq 


Sold  C.  H.  Day  on  % 

7  tons  Massillon  Coal  $2.00 

3  cords  Oak  Wood  4.00 


■17- 


Settled  my  account  with  Jennings  &  Co.  to  date, 

giving  them  my  note  at  30  days. 

—  19— 
Bo't  of  Miller  &  Sons  on  %  at  60  days 

Mdse  as  per  Inv.  No.  18 


1-1 
12 


26 


75 


121 


00 


25 


40 


Journal. — This  book  was  used  for  the  recording  of  the  debits  and  the  credits  that  arise  from  the  various  trans- 
actions, and  for  facilitating  their  posting  to  the  Ledger. 

The  following  form  illustrates  its  use,  the  entries  being  those  required  for  the  transactions  recorded  in  the 
foregoing  Day  Book  forms: 

Chicago,  III.,  Jan.  16,  19 


16 
5 

21 
40 

5 

28 


C.  H.  Day,  Dr. 
To  Mdse 

Jennings  &  Co.,  Dr. 
To  Bills  Payable 

Mdse,  Dr. 

To  Miller  &  Sons 


-17— 


-19— 


D 

rs. 

Crs. 

26 

00 

26 

00 

75 

25 

75 

25 

121 

40 

121  j 

40 

214 


BOOKS  OF  RECORD 


Combined  Journal  and  Day  Book. — The  advantage  of  combining  the  records  of  the  Day  Book  and  the  Journal 
in  a  single  book  was  soon  appreciated  by  practical  bookkeepers;  and  in  recent  years  the  older  forms  of  the  separate 
Day  Book  and  Journal  are  seldom  used,  the  form  generally  adopted  being  the  one  which  has  been  used  in  the  intro- 
ductory business  divisions  of  this  course. 

Ledger. — This  book  has  been  used  from  very  ancient  times.  At  first  it  was  a  mere  blank  page  divided  into 
two  equal  divisions  by  a  vertical  line  surmounted  by  a  cross  line,  upon  which  was  written  the  heading,  or  title, 
of  the  account.  To  the  left  of  the  vertical  line  were  entered  the  charges,  or  debits,  and  on  the  right,  the  allow- 
ances or  credits.     Later,  other  rulings  were  added  for  dates,  money  columns,  etc. 

At  first  it  was  customary  to  itemize  the  ledger  entries,  and  the  practice  still  survives  in  the  "Itemized  Ledger" 
or  "Account  Book,"  "Customers'  Ledger,"  etc.  This  form  of  the  Ledger  is  quite  useful  in  keeping  single  accounts 
and  for  the  purposes  of  a  small  business,  or  where  the  books  are  kept  by  single  entry. 

Auxiliary  Books. — The  Day  Book  and  Journal,  or  the  Combined  Day  Book  and  Journal  with  the  Ledger, 
constitute  what  are  frequently  termed  the  "principal"  or  "fundamental"  books  of  record  used  in  bookkeeping.  But 
accountants  soon  found  the  advantage  to  be  gained  by  supplementing  these  with  various  special  books,  known  gen- 
erally as  "Auxiliary  Books."  These  include  the  Cash  Book,  Bill  Book,  Sales  Book,  Invoice,  or  Purchase  Book, 
Pass  Book,  Petty  Ledger,  Customers'  Ledger,  etc.,  with  the  use  of  which  the  student  is  already  familiar. 


CHAPTER  III.— Business  and  Financial  Statements 

Thus  far  we  have  considered  the  methods  and  requirements  of  that  division  of  accounting  which  involves 
the  making  of  complete  and  classified  records  of  the  various  transactions  of  a  business.  We  are  now  to  consider 
some  of  the  various  means  of  summarizing  the  results  and  conditions  of  a  business,  condensing  them  from  the 
records  that  have  been  kept  during  any  given  business  period. 

Commercial  enterprises,  in  their  extent  and  character,  take  a  wide  range,  beginning  with  the  simple  and  monot- 
onous transactions  of  the  little  retail  shop,  and  extending  to  the  vast  and  complicated  affairs  of  a  great  corporation. 

As  there  is  great  variation  in  the  books  of  record  required  for  different  kinds  and  grades  of  business,  so,  also, 
is  there  great  diversity  in  the  accounting  devices  required  for  exhibiting  net  results  and  financial  conditions  at  the 
close  of  any  business  period. 

The  terms  "Statement,"  "Balance  Sheet,"  "Financial  Exhibit,"  etc.,  are  variously  employed  to  designate  the 
different  forms  used  by  accountants  in  setting  forth  the  conditions  and  results  of  a  business. 

The  term  "Statement"  is  more  properly  applied  to  any  schedule  of  the  assets  and  liabilities  of  a  business,  while 
the  term  "Balance  Sheet"  implies  a  more  comprehensive  exhibit,  setting  forth  the  face  of  the  ledger  accounts,  the 
sources  and  amounts  of  the  various  losses  and  gains,  and  a  comparison  of  the  present  state  of  the  business  with 
the  condition  at  the  outset. 

With  the  Balance  Sheet  as  used  in  ordinary  mercantile  business,  the  student  has  already  been  familiarized, 
but  we  exemplify  here  a  number  .of  special  forms  adapted  to  various  requirements. 

It  should  be  noted  by  the  student  that  the  Trial  Balance  is  really  the  basis  of  all  statements,  or  other  sum- 
maries of  a  business,  and  that  the  preparation  of  a  correct  trial  balance  is  the  first  step  to  be  taken  in  preparing 
any  schedule  of  the  facts  and  conditions  of  a  business. 


L08SE8 

Resources 

Dr. 

L.  F. 

Cr. 

Liabilities 

Gains 

Proprietor's  Stock 

1 

5000 

3290 

10 

9670 

50 

Cash 

2 

6380 

40 

100 

100 

Expense 

3 

1000 

6460 

40 

Merchandise 

4 

7560 

40 

2100 

1150 

1150 

B.  F.  Stone 

5 

264 

H.  Murphy 

6 

945 

50 

681 

50 

1826 

50 

2062 

30 

B.  F.  Clark 

7 

235 

80 

1520 

90 

J.  F.  Wyman 

8 

2469 

65 

948 

75 

1379 

75 

D.  M.  Ellis 

9 

1749 

50 

369 

75 

1733 

40 

1966 

80 
65 

F.  F.  Campbell 

10 

233 

40 
65 

00 

100 

9000 

00 

2+574 

24574 

2000 

2100 

Summary 

Total  Resources 

9000 

Total  Liabilities 

Proprietor's  Pres.  Worth 
Total  Gain 

2000 

7000 

2100 

Total  Loss 
Net  Gain 

100 

2000 

Proprietor's  Net  Investment 
Proprietor's  Pres.   Worth 

5000 

7000 

1 

BUSINESS  AND   FINANCIAL   STATEMENTS 


215 


Balance  Sheets. — The  form  of  balance  sheet  on  page  216  differs  from  the  forms  already  given  at  the  beginning 
of  the  student's  work  in  that  the  statement  of  Losses  and  Gains  precedes  instead  of  follows  the  statement  of  Re- 
sources and  Liabilities.     This  form  of  balance  sheet  is  used  by  one  of  the  most  noted  eastern  business  colleges. 

The  form  of  Balance  Sheet  on  page  214  has  the  advantage  of  compactness  and  simplicity,  and  is  preferred  by 
some  accountants.  The  columns  marked  "Dr."  and  Cr."  respectively  show  the  debit  and  credit  sides  of  the  Trial 
Balance.  In  the  summary,  the  proprietor's  present  worth  is  found  by  subtracting  the  total  liabilities  from  the  total 
resources.  The  total  losses  are  then  subtracted  from  the  total  gains,  and  the  difference,  cr  net  gain,  added  to  the 
original  net  investment  also  gives  the  proprietor's  present  worth. 

Statement  of  Affairs. — This  is  a  schedule  and  summary  of  the  assets  and  liabilities  of  an  insolvent  debtor, 
arranged  so  as  to  show  both  actual  and  contingent  liabilities,  also,  both  the  nominal  value  of  the  assets,  and  the 
actual  value  that  is  expected  to  be  realized  upon  them.  The  purpose  of  a  Statement  of  Affairs  is  to  set  forth 
the  real  condition  of  an  estate,  or  business,  with  respect  to  realization,  and  the  actual  deficiency  as  to  liquidation. 
Deficiency  Account. — This  is  a  summary  showing,  in  classified  form,  the  causes  so  far  as  these  may  be  gath- 
ered from  the  books,  that  have  brought  about  a  condition  of  insolvency.  The  Deficiency  account  is  usually  appended 
to  the  "Statement  of  Affairs." 

Example. — Mason  &  Roberts  being  unable  to  meet  their  obligations,  it  is  found  from  their  books  and  from  the 
testimony  of  the  members  of  the  firm  that  their  condition  is  as  indicated  by  the  following  general  statement: 

Cash  on  hand '. $  4,950 

Debtors:  $900  good;  $540  doubtful,  but  estimated  to  produce  $1S0;  $900  bad 2,340 

Property  estimated  to  produce  $8,100 12,600 

Bills  Receivable,  good 3,825 

Other  securities:  $2,700   pledged   with  partially  secured   creditors;  remainder  held   by 

fully  secured  creditors ' 25,200 

Mason,  withdrawals 8,100 

Roberts,  withdrawals 7,560 

Sundry  losses 12, 150 

Trade  expense 6,660 

Creditors;  unsecured 22,500 

Creditors,  partially  secured 21,510 

Creditors  fully  secured , 15,300 

Preferential  claims,  wages,  salaries,  and  taxes 630 

Mason,  capital 9,000 

Roberts,  capital 14,445 

From  the  foregoing  general  statement  the  following  "Statement  of  Affairs"  and  "Deficiency  Account"  are 
prepared : 

Note. — For  explanation  of  the  technical  business  terms  used  in  this  Statement,  consult  the  "Vocabulary  of  Business  Terms." 


Total 
Liabil- 
ities 

Liabilities 

Expect- 
ed to 
Rank 

NOMIN 

Asset 

jL                         Assets 

Esti- 
mated to 
Produce. 

122,500 

00 
00 

00 

00 

00 

Creditors  unsecured 

per  schedule  A.. 
Creditors  partly  secured 

per  schedule  B.. 
Securities  at  estimated  value 

Creditors  fully  secured 

per  schedule  C. 
Securities  at  estimated  value 

Surplus  to  contra 

$21,510 

2,700 

oo 

00 
00 

00 
00 

S22.500 
18.810 

00 
00 

$  4,950 
12,600 
2,340 

3,825 
25,200 

$12,600 

540 

900 

00 

00 

00 

00 
(HI 
00 

$  4,950 
8,100 

900 
l&o 

3,825 

7,200 
25,155 

630 

0(1 

21,510 

00 

00    Sundry  Debtors, 

per  schedule  F 

Doubtful 

Bad 

15,300 

15,300 
22.500 

00 

00 

7,200 

00    Bills  receivable, 

per  schedule  G  . 
00    Other  securities  in  hands  of  cred- 
itors, 

Fully  secured 

2,700 
22,500 
25.200 

Preferential  creditors,  for  wages, 
salaries,  taxes,  etc. 

per  schedule  D.. 
Deducted  contra 

630 

630 

00 

/ 

Surplus  from   securities  in   the 
hands  of  creditors  fully  se- 

on 

Deduct  preferential  creditors  for 
wages,  salaries,  taxes,  etc., 

00 
00 

Deficiency  as  per  Deficiency  Acct. 
00 

24,525 

16.7R5 

(X) 
00 

59,940 

41,310 

00 

48.915 

41,310 

00 

DEF 

ICIENCY  ACCOUN 

r.    ma 

SON  &  ROBERTS 

To  Deficiency  as  shown  by  State- 
To  Capital  brought  into  the  busi- 
ness at  commencement,  and 
since,  viz.— 

Mason,  capital 

Roberts,  capital.. 

9,000 
14.445 

00 
00 

$16,785 
23,445 

00 
00 

obi 

By  Losses  on  Trading,  viz.— 

Trade  Expenses 

By  Losses  and  Shrinkage  in  Val- 
ues, as  exhibited  by  State- 
ment of  Affairs,  viz.— 

$12,150 
0,(560 

4,500 
360 
900 

00 
00 

00 
00 

00 

18,810 

5,760 

15,660 
40,230 

00 

Debtors,  Doubtful  .. 
"       Bad 

By  Withdrawals  from  the  busi- 
ness, viz.— 

)0 

8,100 
7.560 

00 
(X) 

1 

X) 

40.230 

M 

216 


BUSINESS   AND    FINANCIAL   STATEMENTS 


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BUSINESS  PAPERS  IN   GENERAL  217 

CHAPTER   IV. — Business  Papers  in  General 

By  Bus'ness  Paper  is  meant  the  current  obligations  used  in  trade,  as  notes,  drafts,  acceptances,  and  the  like. 

Negotiability. — A  paper  is  said  to  be  negotiable  when  the  holder  has  power  to  transfer  it  to  others,  who,  if 
they  have  received  it  in  good  faith  and  for  value,  have  the  absolute  right  to  enforce  its  collection  when  due. 

Negotiable  Words. — The  quality  of  negotiability  is  given  to  a  paper  by  incorporating  in  it  what  are  known  as 
negotiable  words.  These  usually  consist  of  the  words  "or  order"  or  "or  bearer"  written  after  the  name  of  the 
payee. 

Or  Bearer. — An  instrument  that  is  payable  to  "bearer"  is  transferable  by  delivery;  that  is,  it  is  transferable 
from  one  person  to  another  without  indorsement,  and  the  maker  is  obliged  to  pay  it  when  due,  to  any  person 
who  presents  it  and  demands  payment,  provided  always  such  person  has  come  into  possession  of  it  lawfully 
and  in  good  faith. 

Or  Order. — The  words  "or  order"  imply  "to  any  one  whom  the  payee  orders  the  maker  to  pay."  A  paper 
drawn  in  this  form  must  be  indorsed  by  the  payee  in  order  to  make  it  collectible  by  the  person  holding  it. 

Original  Parties. — The  original  parties  to  a  business  paper  are  those  who  are  concerned  in  its  issue,  as  the 
maker  and  the  payee  of  a  note,  and  the  drawer  and  the  payee  of  a  draft. 

Subsequent  Parties. — The  subsequent  parties  are  those  into  whose  hands  it  passes  by  indorsement. 

Due  Bills. — A  Due  Bill  is  a  mere  written  acknowledgment  of  a  debt.  It  is  not  negotiable,  neither  does  it 
contain  a  specific  promise  to  pay,  and  it  is  not  usually  issued  for  a  consideration,  but  merely  to  give  the  creditor 
the  advantage  of  the  debitor's  admission  that  the  debt  exists,  although  the  acknowledgment  of  indebtedness  may 
be  made  "to  the  order"  of  the  person  to  whom  the  due  bill  is  given,  or  even   "to  bearer." 

Due  bills,  when  used  by  responsible  parties,  often  pass  from  hand  to  hand  in  the  course  of  business.  Unless 
otherwise  specified,  they  are  payable  in  cash  and  upon   presentation. 

They  must,  however,  be  considered  as  purely  informal  papers,  and  should  not  be  accepted  from  strangers,  as 
the  buyer  takes  them  entirely  at  his  own  risk. 

The  following  examples  illustrate  the  various  ways  in  which  due  bills  may  be  drawn: 

DUE  BILL— KIND  OF  PAYMENT  NOT  SPECIFIED 

Streator,  111.,  June  2,  19— 
Due  S.  Walker  on  demand  Fourteen  Dollars  and  Fifty  cents  ($14.50). 

T.B.  HENDERSON. 

DUE  BILLS— KIND  OF  PAYMENT  SPECIFIED 

Hartford,  Conn.,  May  8,  19— 
Due  James  Bell  Fifteen  Dollars  in  Cash. 

G.  C.  BENTON. 

Fenton,  Mich.,  Jan.  2,  19— 
Due  P.  C.  Jones  Five  Dollars  and  Seventy-five  Cents  ($5.75)  in  merchandise  at  our  store. 

COOK  &  WILLIAMS. 

Elkhart,  Ind.,  April  2,  19— 
Due  J.  S.  Brown  Sixteen  Dollars,  payable  in  brick  at  our  yard,  at  $7.50  per  M. 

SAWYER  &  CO. 

DUE  BILL  WITH  INTEREST 

Canton,  Ohio,  Oct.  29,  19— 
Due  T.  C.  Henry  Twenty-five  Dollars  ($25.00)  with  interest  at  6  per  cent  per  annum  until  paid. 

R.  W.  MILLER. 


TRANSFERABLE  DUE  BILLS 

i 
Due  bearer  Eight  Dollars,  payable  in  cash  upon  presentation. 


Madison,  Wis.,  Feb.  9,  19- 


D.  W.  JONES. 

Volney,  Mich.,  March  6,  19— 
Due  C.  W.  Stone,  or  order,  Twelve  Dollars,  payable  in  merchandise  at  our  store. 

LASALLE  &  SONS. 

Promissory  Notes. — The  general  features  of  promissory  notes  have  already  been  discussed  in  Part  I,  of  this 
book.  There  are  many  forms  of  these  instruments  in  use,  and,  indeed,  there  is  hardly  any  limit  to  their  number, 
as  a  promissory  note  is  merely  a  written  contract,  and,  within  certain  limits  prescribed  by  the  statute  laws  of  the 
different  States,  may  contain  any  conditions  that  the  payee  and  maker  may  agree  to  insert.  For  a  full  discussion 
of  the  legal  obligations  and  requirements  pertaining  to  notes,  the  student  is  referred  to  any  good  work  on  Commercial 
Law.     We  give  herewith  a  number  of  special  forms  of  promissory  notes  that  are  in  common  use. 

NOTE  WITHOUT  INTEREST 

$125.00  Lansing,  Mich.,  Feb.  20,  19 — 

Three  months  after  date,  I  promise  to  pay  A.  J.  Wiles,  or  order,  One  Hundred  Twenty-five  Dollars. 

M.  L.  OLDS. 

The  above  is  a  plain  promissory  note,  sometimes  called  a  time  note.  It  is  given  for  a  specified  time  and  with- 
out interest. 


218  BUSINESS   PAPERS  IN  GENERAL 

INTEREST  PAYABLE  ANNUALLY 

$2500.00  Chicago,  111.,  Jan.  15,  19— 

Five  years  after  date,  for  value  received,  I  promise  to  pay  J.  C.  Stone,  or  order,  Twenty-five  Hundred  Dollars, 
with  interest  at  the  rate  of  six  per  cent  per  annum,  such  interest  to  be  due  and  payable  annually. 

JOHN  A.  MARTIN. 
INTEREST  CONDITIONAL 
$1200.00  Boston,  Mass.,  July  5,  19 — 

One  year  after  date,  for  value  received,  I  promise  to  pay  R.  S.  Walker,  or  order,  Twelve  Hundred  Dollars, 
with  interest  from  date  at  eight  per  cent  per  annum  unless  the  principal  is  paid  at  maturity,  in  which  case  no 
interest  is  to  be  paid.  HENRY  M.  LAWSON. 

NOTE  PAYABLE  ON  OR  BEFORE  MATURITY 
$625.00  San  Francisco,  Cal.,  Mar.  1,  19 — 

On  or  before  Jan.  1,  19 — ,  I  promise  to  pay  C.  J.  Craddock,  or  order,  Six  Hundred  Twenty-five  Dollars, 
with  interest  at  six  per  cent,  for  value  received.  G.  W.  POPP. 

A  note  made  payable  "on  or  before"  a  specified  date  has  an  advantage  in  favor  of  the  maker,  allowing  him 
to  pay  it  any  time  before  maturity,  thus  saving  the  interest. 

NOTE  ON  DEMAND 

$450.00  St.  Louis,  Mo.,  Jan.  10,  19— 

On  demand,  I  promise  to  pay  O.  J.  Willis,  or  order,  Four  Hundred  Fifty  Dollars,  value  received. 

D.  W.  SPRINGER. 
This  note  is  due  whenever  the  person  holding  it  sees  fit  to  demand  payment.     It  may  be  written  so  as  to 
bear  interest  if  desired. 

NON-NEGOTIABLE  NOTE 
$380.00  San  Francisco,  Cal.,  Feb.  4,  19— 

Ninety  days  after  date,  for  value  received,  I  promise  to  pay  W.  H.  Wheeler,  only,  Three  Hundred  Eighty 
Dollars,  with  interest  at  seven  per  cent  per  annum  until  paid.  M.  A.  MC  CORMICK. 

JOINT  NOTE 

$95.00  San  Francisco,  Cal.,  Jan.  1,  19— 

One  year  after  date,  we  jointly  promise  to  pay  O.  L.  Miller,  or  order,  Ninety-five  Dollars,  for  value  received, 
with  interest  at  two  per  cent  per  month  until  paid.  W.  M.  CLARK, 

B.  F.  STONE. 
JOINT  AND  SEVERAL  NOTE 
$180.00  San  Francisco,  Cal.,  Jan.  10,  19— 

Sixty  days  after  date,  for  value  received,  we  jointly  and  severally  promise  to  pay  M.  C.  Watson,  or  order, 
One  Hundred  Eighty  Dollars,  with  interest  at  five  per  cent.  D.  F.  PIPER, 

CLARENCE  DAVIS. 
In  a  note  of  this  character,  the  makers  are  united  in  the  obligation  in  such  manner    that    the    payee    may 
proceed  against  all  makers  together,  or  each  one  separately  for  the  payment  of  the  note;  that  is,  he  can  collect 
the  entire  sum  from  any  one  of  the  makers  if  he  is  solvent. 

PRINCIPAL  AND  SURETY  NOTE 

$500.00  St.  Paul,  Minn.,  Jan.  20,  19— 

Ninety  days  after  date,  for  value  received,  I  promise  to  pay  T.  M.  Seary,  or  order,  Five  Hundred  Dollars,  with 

interest  at  eight  per  cent  per  annum  after  maturity  until  paid.  C.  F.  WHEELER,  Principal. 

C.  F.  COLLINS,  Surety. 
In  a  note  of  this  kind  the  payee  is  obliged  to  collect  it  of  the  principal  if  possible,  and  only  in  case  of 

inability  to  do  so,  will  he  be  allowed  to  collect  of  the  surety. 

WITH  COMPOUND  INTEREST 

$200.00  San  Francisco,  Cal.,  Jan.  1,  19— 

On  Jan.  1,  19 — ,  I  promised  to  pay  J.  B.  Robb,  or  order,  Two  Hundred  Dollars,  with  interest  thereon  from 
the  date  thereof,  till  paid,  at  the  rate  of  four  and  one-half  per  cent  per  annum,  payable  quarterly,  and  if  such 
interest  be  not  so  paid,  then  to  be  compounded  by  being  added  to  the  principal  and  becoming  a  part  thereof,  and 
bearing  thereafter  the  same  rate  of  interest.  E.  R.  STACKABLE. 

NOTE  PAYABLE  BY  INSTALLMENTS 

$250.00  St.  Louis,  Mo.,  April  15,  19— 

For  value  received,  I  promise  to  pay  J.  G.  Blast,  or  order,  Two  Hundred  Fifty  Dollars,  with  interest  at 
six  per  cent  in  the  following  manner:  viz.,  One  Hundred  Dollars  in  two  months  after  date,  and  the  balance  in  install- 
ments of  Fifty  Dollars  each  successive  month  until  the  entire  amount  is  paid.  C.  A.  BENNETT. 

JUDGMENT  NOTE 

$1200.00  San  Francisco,  Cal.,  June  2,  19— 

One  year  after  date,  for  value  received,  I  promise  to  pay  W.  E.  Devine,  or  order,  Twelve  Hundred  Dollars, 
and  I  hereby  nominate,  constitute  and  appoint  the  said  W.  E.  Devine,  or  any  attorney  at  law  of  this  State,  my 
true  and  lawful  attorney  irrevocably,  for  me,  and  in  my  name,  to  appear  in  any  Court  of  Record  of  this  State, 
at  any  time  after  the  above  promissory  note  becomes  due,  and  to  waive  all  process  and  service  thereof,  and  to 
confess  judgment  in  favor  of  the  holder  thereof  for  the  sum  that  may  be  due  and  owing  with  interest  and  cost, 
and  waiving  ail  errors,  etc. 


BUSINESS    PAPERS  IN  GENERAL  219 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my  hand  and  seal  in  the  city  of  San  Francisco,  State  of  Cali- 
fornia, this  first  day  of  March,  one  thousand  nine  hundred  ten. 
Sealed  and  delivered  in  the  presence  of 

J.  W.  JOHNSON     | 

J.  M.  BUGBEE        \  J-  F-  WYMAN. 

A  judgment  note  is  a  promissory  note  of  any  usual  form,  containing  also  power  of  attorney  to  appear  and 
confess  judgment  for  the  sum  therein  named.      In  some  States  a  note  of  this  kind  cannot  be  made  negotiable. 

COLLATERAL  NOTE 

$90.00  San  Francisco,  Cal.,  Jan.  10,  19— 

Ninety  days  after  date,  for  value  received,  I  promise  to  pay  the  H.  S.  Crocker  Co.,  Ninety  Dollars  with  in- 
terest at  six  per  cent.  As  security  for  the  payment  of  the  amount,  I  have  deposited  herewith  a  hunting  case  gold 
watch,  Swiss  make,  No.  362,431,  with  authority  to  sell  said  watch  at  public  or  private  sale,  provided  the  note 
and  interest  thereon  are  not  promptly  paid  at  maturity. 

Witness:  C.  P.  Smith.  C.  W.  RALSON. 

A  collateral  note  is  one  that  is  secured  by  personal  property  or  right  of  action ;  such  as,  a  bill  of  sale  or 
certificate  of  stock.  If  the  note  is  duly  paid  at  maturity,  the  payee  must  surrender  to  the  maker  such  chattels 
as  were  furnished  him  as  security. 

CHATTEL  NOTE 
$50.00  Sumner,  Ind.,  July  2,  19— 

Thirty  days  from  date  I  promise  to  pay  J.  S.  Cooper  Fifty  Dollars  in  No.  1  Red  Wheat  at  the  market  price 
at  time  of  delivery,  the  same  to  be  delivered  at  his  warehouse.     Value  received. 

R.  C.  THOMPSON. 

Orders. — An  order  is  an  informal  written  request  for  the  payment  of  money  or  the  delivery  of  merchandise 
or  other  property  to  the  person  to  whom  the  order  is  given. 

The  nature  of  an  order  is  the  same  as  that  of  a  check  or  draft,  the  parties  and  their  relation  to  one  another 
being  the  same.     An  order  may  be  made  non-negotiable  by  omitting  the  words  "or  order"  or  "or  bearer." 

Following  are  common  forms  of  orders: 

ORDER  PAYABLE  IN  CASH 

$36.00  Ypsilanti,  Mich.,  April  20,  19— 

Mr.  W.  H.  Townsend,  please  pay  I.  O.  Chapman,  or  order,  Thirty-six  Dollars,  in  cash,  and  charge  it  to  my 

account.  A.  G.  THURMAN. 

The  words  "in  cash"  are  generally  not  necessary;  however,  they  should  be  used  if  the  person  drawn  on  has 

been  accustomed  to  paying  our  order  in  merchandise  or  otherwise. 

ORDER  PAYABLE  IN  GOODS 

$25.00  Valparaiso,  Ind.,  March  15,  19— 

Mr.  E.  K.  Isaacs,  please  pay  H.  B.  Brown,  or  order,  Twenty-five  Dollars  in  goods  from  your  store,  and 

charge  to  my  account.  A.  A.  SOUTHWORTH. 

The  object  in  stating  that  the  goods  are  to  be  taken  from  his  store,  is  that  the  person  presenting  the  order 

will  have  no  right  to  expect  goods  that  are  not  already  in  stock. 

ORDER  AS  RECEIPT  IN  FULL  OF  ACCOUNT 

$65.00  New  Orleans,  May  1,  19— 

M.  J.  Pease,  please  pay  to  Jos.  Hanna,  or  order,  Sixty-five  Dollars  in  goods  from  your  store,  and  this  shall 

be  your  receipt  in  full  of  my  account.  JAMES  GOODNO. 

Orders  of  this  character,  the  same  as  others,  may  be  made  payable  in  cash,  merchandise,  or  other  property. 

ORDER  ON  PARTNER    CHARGED  TO  PRIVATE  ACCOUNT 

$10.00  Oakland,  Cal.,  March  18,  19— 

Mr.  J.  F.  Wyman,  please  pay  Thomas  Coolidge,  or  order,  Ten  Dollars,  and  charge  to  my  private  account. 

CHAS.  ADAMS. 
An  order  of  this  kind  indicates  a  private  agreement  between  the  partner  issuing  the  order  and  the  person 
receiving  it. 

ORDER  ON  PARTNER 
$15.00  Woodland,  Cal.,  April  11,  19— 

Mr.  J.  P.  Osborn,  please  pay  C.  B.  Clark,  or  order,  Fifteen  Dollars,  and  charge  to  him  on  account. 

J.  P.  CUNNINGHAM. 
An   order  of  this  character  may  be  given  when   arrangements  are  made  with  one  of  the  partners  who  is 
absent  from  the  place  of  business. 

ORDER  WITH  NO  AMOUNT  SPECIFIED 
$100.00  Sacramento,  Cal.,  April  12,  19— 

Mr.  James  Arthur,  please  let  W.  S.  Gannon,  or  order,  have  merchandise  from  your  store  to  an  amount 
not  exceeding  One  Hundred  Dollars,  and  charge  the  amount  to  my  account.  C.  G.  JEFFERSON. 

ORDER  FOR  YOUR  OWN  PROPERTY 

Detroit,  Mich.,  March  20,  19— 
Mr.  W.  S.  Sampson,  please  let  the  bearer  have  my  watch,  and  oblige.  E.  B.  BARNUM. 

Receipts. — It  is  a  good  business  rule  always  to  exact  a  receipt  when  you  deliver  to  another  anything  oi 
value  for  which  you  do  not  receive  immediate  payment,  or  some  other  tangible  evidence  of  the  delivery. 


220  BUSINESS  PAPERS   IN   GENERAL 

Receipts  vary  greatly  in  form,  but  they  should  always  describe  clearly  the  thing  received  and  the  purpose 
for  which  it  is  delivered  by  the  person  to  whom  the  receipt  is  given. 

The  following  will  serve  to  illustrate  some  of  the  many  forms  of  receipts: 

RECEIPT  IN  FULL  OF  ACCOUNT 

$125.00  San  Francisco,  Cal.,  March  18,  19— 

Received  from  Pacific  Press  Publishing  Company,   One   Hundred  Twenty-five   Dollars,    in    full    of    account 
to  date.  H.  S.  CROCKER  &  CO., 

per  W.  E.  Dunn. 
A  receipt  like  this  acknowledges  the  payment  of  all  claims  up  to  date,  except  notes  and  other  papers  of 
a  similar  character. 

RECEIPT  IN  FULL  OF  ALL  DEMANDS 
$95.00  Philadelphia,  Pa.,  Jan.  22,  19— 

Received  of  Frank  Barker,  Ninety-five  Dollars,  in  full  of  all  demands  to  date. 

CLARENCE  REYNOLDS. 
This  receipt  indicates  that  nothing  remains  unpaid,  either  book  account  or  commercial  papers. 

RECEIPT  FOR  MERCHANDISE  ON  ACCOUNT 
$300.00  Helena,  Mont.,  May  3,  19— 

Received  of  G.  E.  Rogers,  sixty  barrels  of  Stockton  Mills'  flour,  at  Five  Dollars  per  barrel,  to  apply  on  his 
account.  v  C.  M.  WIGGIN. 

A  RECEIPT  BY  A  PERSON  WHO  CANNOT  WRITE 
$145.00  Salt  Lake  City,  Utah,  March  22,  19— 

Received  from  W.  C.  Patrick,  One  Hundred  Forty-five  Dollars,  in  full  of  account  to  date. 

His 

J.  C.  Vance,  Witness.  "  JAMES  +  COOPER. 

Mark 

Not  only  receipts,  but  all  other  documents  signed  by  persons  who  cannot  write  should  be  signed  before  a  wit- 
ness and  in  this  manner. 

RECEIPT  FOR  RENT  OF  STORE 
$200.00  London,  Ont.,  Jan.  2,  19— 

Received  of  J.  J.  O'Brien,  Two  Hundred  Dollars,  for  rent  of  store  No.  1236  Market  Street,  for  one  month, 
ending  Jan.  31,   19—.  W.  C.  RALSTON. 

RECEIPT  FOR  PAYMENT  OF  ACCOUNT  BY  ONE  PERSON  FOR  ANOTHER  PERSON 
$50.00  Atlanta,  Ga.,  Jan.  25,  19— 

Received  of  C.  E.  Howard,  Fifty  Dollars,  in  full  of  J.  B.  Sanford's  account  to  date. 

UNION  IRON  WORKS,  W.  A.  Hill,  Sec. 
RECEIPT  FOR  PAYMENT  OF  ACCOUNT  BY  NOTE 
$173.00  Denver,  Colo.,  March  1,  19— 

Received  from  M.  J.  Pease,  his  note  No.  20,  of  this  date,  at  three  months,  in  my  favor,  for  One  Hundred 
Seventy-three  Dollars,  which,  when  paid,  will  be  in  full  of  account  to  date. 

HENRY  CLEVELAND. 
RECEIPT  FOR  INTEREST  ON  BOOK  ACCOUNT 
$28.50  San  Francisco,  Cal.,  March  1,  19 — 

Received  of  A.  G.  Thurman,  Twenty-eight  Dollars  and  Fifty  Cents,  in  full  for  three  months'  interest,  due  this 
day,  on  his  account,  bearing  due  date  of  Dec.   1,    19 — .  JOHN  CLEARY. 

This  receipt  is  given  for  interest  past  due  on  a  book  account.  It  is  generally  charged  by  merchants,  after 
the  expiration  of  a  specified  time  which  they  usually  give  their  customers.  This  time  varies  according  to  the  cus- 
tom of  the  house,  but  is  usually  thirty,   sixty,  or  ninety  days. 

RECEIPT  FOR  INTEREST  ON  A  NOTE 

$35.00  Battle  Creek,  Mich.,  Jan.  25,  19— 

Received  from  H.  M.  Sprague,  Thirty-five  Dollars,  in  full  for  one  year's  interest  to  Jan.  20,  19 — ,  on  his  note, 
of  five  hundred  dollars,  given  for  two  years,  in  my  favor,  dated  Jan.  20,   19 — . 

G.  W.  HAYDEN. 
RECEIPT  FOR  PART  PAYMENT  OF  A  NOTE 
$150.00  Mansfield,  Ohio,  Feb'.  12,  19— 

Received  of  George  W.  Clinton,  One  Hundred  Fifty  Dollars  as  part  payment  on  his  note  of  four  hundred 
dollars,  given  Dec.  1,  19 — ,  for  six  months  after  date,  in  my  favor.  G.  W.  ALLEN. 

A  payment  of  this  kind  should  always  be  indorsed  on  the  back  of  the  note  by  the  person  receiving  it,  and 
at  that  particular  time.     See  indorsement  for  part  payment  on  note,  page   51. 

RECEIPT  FOR  MONEY  ADVANCED  ON  CONTRACT 
$80.00  Toledo,  Ohio,  Jan.  19,  19— 

Received  Eighty  Dollars  of  M.  A.  Allen,  as  an  advanced  payment  on  a  contract  of  Dec.  20,  19 — ,  for  furnish- 
ing 200  cords  of  18-in.  oak  wood.  C.  E.  HOWARD. 

RECEIPT  FOR  PROPERTY  HELD  IN  TRUST 

Indianapolis,  Ind.,  Jan.  16,  19 — 
Received  of  Frank  Harris  the  following  enumerated  articles  to  be  held  in  trust  for  him,  and  returned  on 
his  demand:  One  hunting  case  gold  watch,  Swiss  make,  two  promissory  notes  each  dated  Dec.  1,  19 — ,  and  signed 
by  M.  A.   Williams — one  for  three  hundred  dollars,  due  six  months  from  date,  and  one  for  five  hundred  dol- 
lars, due  one  year  from  date.  K.  L.  MILLER. 


BUSINESS   PAPERS  IN  GENERAL  221 

A  RECEIPT  FOR  A  LOST  OR  STOLEN  NOTE 

$400.00  Austin,  Tex.,  Jan,  12,  19— 

Received  of  G.  P.  Rogers,  Four  Hundred  Dollars,  in  full  payment  of  his  note  No.  10,  executed  in  my 
favor  on  July  10,  19 — ,  for  three  hundred  eighty-one  dollars  with  interest  at  five  per  cent.  The  above  note  has 
been  lost  or  stolen,  and  I  hereby  pledge  myself  to  become  responsible  for  the  payment  of  the  said  note  should  it 
become  necessary  for  the  maker  to  repay  it.  JAMES  UNDERWOOD. 

A  bond  is  usually  given  for  the  payment  of  a  note  under  these  circumstances. 

Miscellaneous  Forms. — The  following  forms  are  of  a  miscellaneous  character,  and  are  those  most  necessary 
or  the  bookkeeper  to  become  familiar  with. 

Arbitration. — Arbitration  is  a  method  of  adjusting  financial  differences  without  resorting  to  litigation. 

It  is  a  fair  and  simple  method  of  arriving  at  a  final,  complete,  and  satisfactory  result,  with  little  expense 
and  in  a  friendly  manner.  Parties  may  verbally  agree  to  submit  existing  difficulties  to  arbitration,  yet  it  is 
better  in  all  cases  to  reduce  the  submission  to  writing,  and  to  see  that  everything  is  expressed  with  care  and 
clearness  in  the  agreement.     The  following  is  a  common  form  of  an  agreement  to  arbitrate: 

KNOW  ALL  MEN  that  we,  H.  F.  Ward,  of  Gold  Hill,  Cal.,  and  E.  M.  Tanner,  of  Nevada  City,  Cal.,  do 
hereby  agree,  to  and  with  each  other,  to  submit  all  claims,  differences,  and  questions  between  us,  to  the  arbitra- 
tion and  determination  of  A.  M.  Armstrong,  Henry  Hall,  and  Matt.  A.  Wolf  skill,  arbitrators;  and  we  hereby  agree 
that  their  decision  and  award  shall  be  final,  and  conclusive,  and  binding  upon  us. 

IN  WITNESS  WHEREOF,  we  have  hereunto  set  our  hands  and  seals  this  10th  day  of  July,  A.  D.   19— 

H.  F.  WARD.        [   Seal  ] 
E.  M.  TANNER.  [  Seal  ] 

Assignment. — The  word  "Assignment"  as  here  used  is  applied  to  the  transfer  of  judgments,  bonds,  notes, 
stocks,  etc.,  by  one  person  to  another.  Assignments  may  be  made  either  by  means  of  a  separate  instrument,  or 
by  indorsing  the  assignment  upon  the  bacjv  of  the  instrument.  The  latter  is  the  general  plan  followed  with  regard 
to  notes,  drafts,  bonds,  or  other  business  papers.  The  person  making  the  transfer  is  called  the  assignor;  the  person 
to  whom  the  transfer  is  made  is  called  the  assignee.  As  a  rule,  a  person  may  assign  almost  any  legal  interest  that 
he  possesses,  as  an  insurance  policy,  lease,  book  account,  etc. 

The  general  effect  of  an  assignment  is  the  same  as  that  of  an  indorsement. 

ASSIGNMENT  INDORSED  ON  BACK  OF  DRAFT 

Stockton,  Cal.,  June  20,  19— 
For  value  received,   I  hereby  assign  the  within  draft  to  J.  J.   DeHaven. 

C.  W.  BREMER. 
ASSIGNMENT  OF  ACCOUNT  TO  BE  ATTACHED  TO  BILL 

In  consideration  of  Ten  Dollars,  I  hereby  sell,  assign,  and  transfer  to  A.  E.  Webb  the  within  amount  justly 
due  me  from  the  within  named  A.  B.  Brook,  and  I  hereby  authorize  the  said  A.  E.  Webb  to  collect  the  amount. 

C.  H.  NORTHROP. 

Guaranty. — A  guaranty  is  a  promise  by  one  person  to  see  that  the  debt  or  undertaking  of  another  is  paid 
or  performed;  thus  it  will  be  seen  that  the  guaranty  is  a  contract  or  agreement  of  one  person  with  another  to 
provide  for  the  fulfillment  of  an  agreement  of  a  third  person. 

GUARANTY  INDORSED  ON  NOTE  OR  OTHER  PAPER 

Feb.  5,  19— 
For  value  received,  I  guaranty  the  payment  of  the  within  note  (bill,  or  account),  if  demanded  when  due. 

C.  I.  MAST. 
GENERAL  FORM  OF  GUARANTY 

Dec.  10,  19— 
For  value  received,  I  guaranty  payment,  at  maturity  of  a  certain  promissory  note,  dated  June  10,  19 — ,  whereby 
D.  F.  Piper  promises  to  pay  Clarence  Davis  the  sum  of  Three  Hundred  Dollars,  in  six  months  from  date,  with  in- 
terest at  the  rate  of  two  per  cent  per  month.  J.  B.  SAN  FORD. 

GENERAL  GUARANTY  BY  LETTER 

San  Francisco,  Cal.,  Nov.  5,  19 — 
Sir:  I  hereby  guaranty,  for  value  received,  to  pay  for  any  and  all  goods  that  you  may  sell  to  Mr.  A.   E. 
Buck,  of  this  place,  within  ninety  days  from  date  thereof,  not  to  exceed  the  total  amount  of  One  Thousand   Dol- 
lars. H.  N.  MONTAGUE. 

Note. — If  letters  of  this  character  arc  not  addressed  to  any  particular  person,  it  gives  the  person  to  whom  it  has  been  issued, 
a  chance  to  buy  where  he  can  do  the  best,  provided  the  parties  are  willing  to  accept  the  guaranty. 

Lease. — A  lease  is  generally  a  sealed  agreement  between  two  or  more  parties,  the  lessor,  or  landlord,  and  the 
lessee,  or  tenant,  wherein  one  of  the  parties  agrees  to  let  or  lease  to  the  other,  certain  premises,  for  which  the 
other  party  agrees  to  pay  a  rental  either  monthly  or  yearly,  or  for  a  term  of  years.  A  lease  may  be  made  with 
or  without  the  privilege  of  renewal;  when  it  is  made  subject  to  renewal,  it  will  be  understood  to  be  at  the  same 
rent,  if  not  otherwise  specified. 

SHORT  FORM  OF  LEASE 

This  indenture,  made  this  25th  day  of  May,  19 — ,  witnesseth:  That  I,  J.  P.  Harrows,  of  San  Francisco,  San 
Francisco  County,  Cal.,  do  hereby  lease,  demise,  and  let  unto  Patrick  Welch  the  following  described  store,  sit- 
uated at  1236  Market  Street,  San  Francisco,  Cal.,  to  wit:  To  have  and  to  hold,  for  the  term  of  three  years,  from 
the  25th  day  of  May,  19 — ,  to  the  25th  day  of  May,  19—,  yielding  and  paying  therefor  a  rental  of  $5,400, 
payable  $150  monthly  in  advance,  upon  the  25th  day  of  each  and  every  month  during  the  three  years,  and  to 


222 


INDORSEMENTS 


deliver  up  the  premises  peaceably  and  quietly  at  the  end  of  the  term,  in  as  good  order  and  condition  as  the 
same  is  now,  or  may  be  put  into,  except  the  reasonable  use  and  wear  thereof.  Also,  I  hereby  agree  not  to 
lease  or  permit  any  other  person  or  persons  to  occupy  the  said  store,  or  improve  the  same,  or  make  any  altera- 
tions therein,  and  should  default  be  made  in  this  agreement  or  the  payment  of  any  portion  of  the  rent  when 
due,  and  for  five  days,  thereafter,  the  said  lessor  may  rerent  it  at  option,  and  at  his  option  terminate  this  lease. 
Signed,  sealed,  and  delivered  in  the  presence  of  J.  P.  HARROW.  [Seal] 

W.  C.  Ralston.  PATRICK  WELCH.     [  Seal  1 

CHAPTER   V.— Indorsements 

An  indorsement  of  a  negotiable  instrument  consists  in  the  holder's  writing  his  name  upon  the  back  of 
the  paper  for  the  purpose  of  transferring  the  title  or  of  enabling  another  person  to  collect  it.  Unless  there  is 
an  express  provision  to  the  contrary  (see  "Qualified  Indorsements,"  page  223),  the  effect  of  an  indorsement  is  to 
make  the  indorser  responsible  to  all  subsequent  holders,  for  the  payment  of  the  paper.  There  are  several  kinds 
of  indorsements.     The  more  important  of  these  are  herewith  illustrated. 

BLANK  INDORSEMENT 


C.  H.  HAINES 


A  paper  thus  indorsed  is  transferable  thereafter,  without  further  indorsement,  the  same  as  if  it  were  payable 
to  bearer.     This  is  the  most  common  form  of  indorsement. 

FULL  INDORSEMENT 


Pay  to  J.  W.  Miller,  or  order 

C.  H.  HAINES 


This  indorsement  stops  the  transfer  of  the  paper  until  the  indorsee,  J.  W.  Miller,  himself  indorses  it.  It  pro- 
tects the  indorsee  against  the  collection  of  the  paper,  in  case  of  its  loss,  by  some  one  who  is  not  entitled  to  receive 
payment  just  as  the  words  "or  order"  in  the  instrument  itself,  protects  the  original  payee. 

GENERAL  INDORSEMENT 


Pay  to  J.  W.  Miller. 

C.  H.  HAINES. 


Under  this  form  of  indorsement,  Miller  cannot  transfer  the  paper,  even  by  indorsement,  until  he  adds  the  words 
"or  order"  after  his  own  name,  which  he  has  the  right  to  do. 

RESTRICTIVE  INDORSEMENTS 
No  1. 


Pay  to  J.   W.   Miller  only. 

C.  H.  HAINES. 

This  indorsement  stops  the  negotiability  of  the  paper  absolutely,  as  Miller  only  can  collect  it.     It  is  used  when 
the  payee,  for  any  reason,  wishes  to  arrange  for  payment  to  be  made  to  a  specified  person,  and  to  him  only. 

No.  2. — Indorsement  for  Deposit 


For  deposit  J.  W.  Miller. 


This  indorsement  is  made  when  the  payee  sends  checks  to  the  bank  for  deposit,  and  wishes  to  protect  himself 
against  possible  payment  of  checks,  or  any  portion  of  them  to  the  clerk  by  whom  it  is  sent. 

No.  3. — Indorsement  for  Collection 


Pay  to  Merchants  Bank,  or  order,  for 
collection. 

C.  H.  HAINES. 

This  indorsement  merely  gives  the  bank,  or  any  one  whom  it  may  designate,  the  power  to  collect  the  paper- 


INDORSEMENTS 


223 


A  paper  thus  indorsed  cannot  be  negotiated  for  consideration,  except  at  the  risk  of  the  purchaser,  as  the  indorse- 
ment shows  that  the  title  to  the  instrument  has  not  been  transferred  by  the  payee.  If  it  is  desired  to  restrict 
the  collection  to  the  indorsee,  the  words  "or  order"  are  omitted. 


CONDITIONAL  INDORSEMENT 


Pay  to  J.  W.  Miller,  or  order,  unless  I 
give  you  notice  not  to  pay. 

C.  H.  HAINES. 


This  gives  the  payee  the  right  to  revoke  the  indorsement  at  any  time  before  maturity.     Other  conditions  might 
be  used  as,  "Pay,  etc.,  unless  I  should  return  from  Europe"  or  "except  in  the  event  of  my  death,"  etc. 

QUALIFIED  INDORSEMENT 


Pay  to  J.   W.  Miller,  or  order,  without 
recourse. 

C.  H.  HAINES. 

This  indorsement  releases  the  indorser  from  other  responsibility  for  the  payment  of  the  instrument  than  he 
would  incur  if  it  were  transferred  without  indorsement.  Of  course,  if  the  indorser  knew  the  paper  to  be  value- 
less, and  negotiated  through  fraud,  he  could  not  avoid  responsibility  by  means  of  a  qualified  indorsement.  But, 
if  the  paper  were  negotiated  in  good  faith,  a  qualified  indorsement  enables  the  indorser  to  avoid  responsibility  in 
case  of  insolvency  of  the  maker.  The  words  "without  recourse"  are  ordinarily  used,  but  the  statutes  of  some  States 
require  a  more  explicit  renunciation  of  responsibility:  as,  "It  is  hereby  agreed  that  I  am  not  to  be  held  responsible 
for  payment,"  or  words  of  similar  import. 

Miscellaneous  Indorsements. — In  a  more  general  sense,  the  word  "Indorsement"  may  imply  any  writing  upon 
the  back  of  a  commercial  instrument,  which  relates  in  any  way  to  its  payment,  as  acknowledgment  of  part  pay- 
ment, guaranty  of  payment,  etc.  It  is  a  general  rule  that  the  holder  of  a  paper  may  make  any  indorsement  upon 
it  that  does  not  materially  affect  the  obligations  of  previous  indorsers.  The  following  forms  illustrate  the  more 
important  of  such  indorsements: 

INDORSEMENT  OF  PART  PAYMENT 

(For  form  of  indorsement  of  part  payment  see  page  51.) 
GUARANTY  OF  PAYMENT  WITH  NOTICE  OF  MATURITY  WAIVED 


For  value  received,  I  hereby  guarantee  the 
payment  of  the  within  note  (or  draft),  and  I 
also  waive  the  right  of  notice  of  demand,  pro- 
test, and  non-payment. 

C.  H.  HAINES. 

Ordinarily  the  indorser  is  entitled  to  legal  notice  in  the  event  of  the  non-payment  of  the  paper, 
greater  security  of  the  indorsee,  the  above  guaranty  and  waiver  of  notice  is  sometimes  required. 


But  for  the 


INDORSEMENT  EXTENDING  TIME 


March  5,  19— 
"I  hereby  renew  the  within  note  with  accum- 
ulated interest,    and   agree   to   pay  it  within 
two  years  from  this  date. 

C.  H.  HAINES. 

This  indorsement  has  the  same  effect  as  if  a  new  note  with  accrued  interest  had  been  made,  to  mature  at 
the  end  of  two  years. 


INDORSEMENT  ON  A  NOTE  GIVEN  TO  SECURE  A  DEBT 


Jan.  5,  19— 
For  value  received,  I  hereby  authorize  A. 
B.  Crook,  only,  to  collect  the  within  note  on 
or  after  maturity,  and  retain  from  the  pro- 
ceeds Thirty-five  Dollars  and  cost  of  collec- 
tion, which  is  to  be  in  full  of  account  to  date. 
The  overplus,  if  any,  is  to  be  paid  to  me  within 
three  days  from  date  of  collection. 

C.  H.  HAINES. 


224  VARIOUS   BOOKKEEPING   METHODS   AND  REQUIREMENTS 

CHAPTER  VI. — Various  Bookkeeping  Methods  and  Requirements 

The  student  of  bookkeeping  should  never  lose  sight  of  the  fact  that  there  is  an  almost  endless  diversity 
in  the  methods  of  bookkeeping  and  business.  Not  only  are  different  methods  required  for  different  classes  of  busi- 
ness enterprises,  but  great  differences  as  to  the  manner  of  arranging  accounts  and  disposing  of  business  transac- 
tions, are  found  among  men  who  are  engaged  in  the  same  class  of  business.  Indeed,  hardly  any  two  offices  are 
alike  in  the  devices  employed. 

Throughout  the  present  course,  the  student  has  been  led  to  employ  as  much  diversity  of  appliances  and  forms 
as  has  seemed  consistent  with  the  unity  of  his  work,  yet  many  other  methods  and  business  devices  are  in 
frequent  use,  which  it  has  not  been  deemed  advisable  to  present  to  the  student,,  heretofore.  A  general  discussion 
and  illustration  of  the  more  important  of  these  will  be  introduced  in  this  chapter,  together  with  a  variety  of 
other  business  information. 

Suspense  Account. — This  is  an  account  used  by  the  wholesale  merchant  and  retailer  who  has  an  extensive 
retail  trade  by  mail,  as  it  sometimes  happens  that  an  order  is  received  for  goods,  or  a  remittance  on  account  it. 
received  from  some  one  who  has  neglected  to  sign  or  enclose  his  letter.  This,  of  course,  makes  it  impossible  for 
the  merchant  to  fill  the  order  or  give  the  proper  credit  on  account.  Under  these  circumstances  he  is  obliged 
to  debit  Cash  and  credit  Suspense  account,  and  wait  for  some  one  to  complain  about  not  receiving  his  goods,  or 
not  having  a  sufficient  credit  on  account.  In  this  account  may  be  entered  all  sums  received  or  found  until  their 
proper  place  on  the  books  can  be  determined. 

Suspended  Account. — This  account  is  used  in  the  place  of  the  Loss  and  Gain  account  for  a  certain  class  of 
personal  accounts,  notes,  drafts,  etc.,  which  are  considered  a  total  loss  to  the  business.  There  are  several  advan- 
tages in  closing  these  accounts  into  a  Suspended  account;  by  collecting  these  into  one  account  their  repetition  in 
the  monthly  Trial  Balance  is  avoided;  again,  the  collection  of  these  amounts  into  a  Suspended  account  exhibits 
in  one  sum  all  the  losses  from  bad  debts.  If  the  defaulted  notes  and  accounts  are  closed  into  the  Loss  and 
Gain  account,  a  business  which  is  otherwise  yielding  a  good  profit,  may  be  made  to  show  a  small  profit,  or 
even  a  loss,  when  the  cause  is  not  in  the  business  itself,  but  in  the  bad  management  that  permitted  the  contract- 
ing of  uncollectible  debts. 

Private  Cost  Mark. — The  majority  of  business  houses  have  a  private  mark  for  their  goods,  by  which  the 
salesmen  can  see  at  a  glance  the  cost  of  each  article.  The  cost  mark  is  made  by  selecting  some  word  or  sen- 
tence containing  the  different  letters,  which  letters,  in  consecutive  order,  represent  the  ten  digits,  as  follows: 

HONEST     PLAY  ,      DONT     GIVE     UP 

1234567890  1234567890 

MISFORTUNE  HARDTIMESX 

1234567890  1234567890 

In  the  latter  term,  "Hard  Times,"  there  are  only  nine  letters,  therefore  "x"  stands  for  "0."  These  char- 
acters are  sometimes  used  for  marking  both  the  cost  and  the  selling  price;  again  they  are  used  only  for  the 
cost  price,  while  the  selling  price  is  marked  in  plain  figures.  Some  merchants  devise  ten  characters  of  their  own, 
and  use  them  in  the  place  of  letters. 

The  cost  price  marked  is  usually  that  listed  upon  the  invoices,  unless  very  large  discounts  were  given  from 
those  prices,  when  the  goods  were  bought.  In  this  case  the  actual,  or  net,  cost  is  marked.  In  this  course, 
unless  otherwise  directed,  always  mark  your  goods  at  the  list  cost,  regardless  of  the  discount. 

Disposal  of  Discounts. — In  general  mercantile  business   there  are  ordinarily  two  classes  of  discounts: 

1.  Those  discounts  that  are  merely  reductions  in  the  price  of  merchandise,  and  which  are  given  as  a 
inducement  to  trade,  or  for  prompt  payment. 

2.  Those  discounts  that  are  in  the  nature  of  allowances  given  for  the  payment  of  accounts,  or  other  obli- 
gations, before  they  are  due. 

The  first  of  these  two  classes,  or  the  commercial  discounts,  have  been  treated  in  this  course  as  pertaining 
to  the  Merchandise  account,  although  some  accountants  have  classified  them  as  true  discounts  and  have  entered 
them  upon  the  regular  Interest  and  Discount  account. 

But  we  think  that  a  just  consideration  of  these  discounts  will  make  it  obvious  that  they  belong  with  the 
Merchandise  account. 

When  a  merchant  sells  goods  at  varying  rates  of  discount,  he  really  gives  his  customers  an  option  as  to 
second  prices,  and,  at  the  time  the  goods  are  sold,  as  he  does  not  know  which  price  the  customer  will  elect 
to  pay,  he  charges  him  the  full  price,  and  then,  should  the  customer  choose  the  lesser  price  that  is  given  for  the 
shorter  term  of  credit,  the  merchant  credits  him  with  the  full  amount,  and  then  enters  the  discount  to  the 
debit  of  Merchandise  in  order  to  adjust  the  account  to  the  actual  sum  received.  For  illustration:  Suppose 
you  sell  a  bill  of  goods  for  $100  net  at  three  months,  and  subject  to  discounts  of  3%  for  60  days,  5%  for  30 
days,  and  6%  for  10  days.  Now,  you  really  offer  these  goods  at  the  conditional  prices,  $100,  $97,  $95,  and  $94. 
As  you  do  not  know  which  sum  you  are  to  receive,  you  credit  Merchandise  with  the  greatest  sum,  $100,  and  then 
if  your  customer  settles  at  ten  days,  you  debit  your  Merchandise  account  with  the  discount  $6,  in  order  to  have 
the  account  properly  affected  by  the  transaction.  On  the  other  hand,  if  this  class  of  discount  entries  were  kept 
in  the  Interest  and  Discount  account,  neither  this  account  nor  the  Merchandise  account  will  give  a  true  exhibit. 

The  Merchandise  account  would  show  greater  gains  than  were  actually  made,  while  the  Interest  and  Discount 
account  would  show  a  series  of  losses  that  probably  do  not  pertain  to  that  account. 

The  purpose  of  the  Merchandise  account  is  to  show  the  actual  profits  that  have  been  made  on  the  merchan- 


VARIOUS   BOOKKEEPING    METHODS  AND    REQUIREMENTS  225 

dise  sold,  but  this  purpose  is  defeated  if  the  account  is  credited  for  all  sales,  and  no  allowance  made  for  the  regu- 
lar discounts  of  the  business. 

In  a  business  where  there  are  many  sales  at  a  discount,  the  books  of  original  entry  (either  the  Journal  or 
Cash  Book)  may  be  provided  with  a  special  column  for  entering  such  discounts,  and  the  totals  of  this  column 
may  be  carried  to  the  debit  of  the  Merchandise  account,  thus  saving  a  multiplicity  of  entries. 

Regarding  purchases  on  which  we  have  been  allowed  a  discount,  the  principle  is  the  same,  as  in  the  case 
of  sales.  If,  when  we  buy  a  bill  of  merchandise,  we  charge  the  Merchandise  account  with  the  full  price,  we 
must  credit  that  account  with  the  discount  when  allowed;  otherwise,  the  account  does  not  show  the  actual  cost. 

The  Interest  and  Discount  is  kept  for  the  purpose  of  showing  all  losses  for  money  paid  out  and  gains  for 
money  received  on  loans,  also  for  discounts  allowed  for  the  prepayment  of  accounts,  notes,  acceptances,  etc. 

To  fill  up  this  account  with  the  regular  discounts  allowed  in  the  course  of  trade,  for  wholesale  purchases, 
short  credits,  or  for  variation  in  the  market  price  of  goods,  would  obviously  defeat  its  purpose. 

Copying  Letters. — It  is  customary  in  most  business  houses  to  keep  a  copy  of  each  letter  sent  out  by  the 
house.     This  may  be  done  in  any  of  three  ways: 

1.  A  carbon  copy  may  be  made  by  inserting  carbon  paper  and  a  lettersheet  under  the  lettersheet  to  be  writ- 
ten on.  But  the  most  common  way  is  to  insert  carbonsheet  and  lettersheet  back  of  the  letterhead  and  take  a 
copy  on  the  typemachine.  The  carbon  copy  is  then  fastened  to  the  customer's  letter,  and  the  two  are  filed,  alpha- 
betically, in  the  ordinary  fiat  letterfile  or  in  the  vertical  file.  This  method  does  not  require  copying  ribbon  on  the 
machine. 

2.  A  copying  ribbon  is  put  on  the  typemachine,  and  an  impression  or  copy  is  taken  of  the  letter  by  means 
of  the  letterpress.     This  is  done  as  follows: 

Open  the  copying  book  at  the  desired  place  for  making  the  copy;  place  an  oilboard  on  the  left-hand  side 
of  the  book;  then  lay  a  damp  cloth  on  the  oilboard;  turn  leaf  of  the  book  on  dampened  cloth,  being  careful  to 
have  the  page  of  the  copying  book  smooth;  then  lay  the  letter  to  be  copied  on  the  page,  face  down;  then  lay  on 
another  oilboard,  carefully  close  the  book,  and  put  in  the  copying  press  under  a  heavy  pressure  for  about  five 
minutes.  When  copying  more  than  one  letter  the  oilboards  need  be  used  only  at  the  beginning  and  the  end. 
When  removing  the  copied  work,  it  is  a  good  plan  to  place  a  large  blotter  between  the  dampened  leaves,  and  also 
to  place  the  copied  letters  between  blotters,  and  put  under  pressure.  A  dozen  or  more  letters  may  be  copied  at 
one  time. 

Great  care  should  be  taken  in  using  a  copying  press,  in  order  that  a  clear  and  unblurred  copy  may  be  se- 
cured. To  obtain  a  good  copy,  much  depends  on  the  proper  dampening  of  the  cloths;  after  wetting  them  they 
should  be  well  wrung  out,  as  too  much  water  will  result  in  producing  a  blurred  and  unreadable  copy. 

Copies,  by  whatever  method,  have  to  be  proved,  in  courts  of  law.  The  copy  by  the  letterpress  and  in  the 
letterpress  book,  whose  pages  are  numbered  consecutively  and  the  dates  of  the  letters  run  chronologically,  some 
falling  before  and  some  after,  the  copy  in  question,  would  be  most  difficult  to  falsify;  and  therefore,  such  copy 
would  carry  more  weight  with  court  and  jury. 

3.  Copying  ribbon  is  used  as  in  No.  2  and  then  the  letter  is  placed  in  a  copying  machine,  the  letter  is  copied 
on  a  ribbon  of  paper  wide  enough  to  take  full  impression  of  the  letter.  The  copy  of  the  letter  is  then  torn  from 
the  ribbon  of  copying  paper  and  fastened  to  the  customer's  letter,  and  the  two  are  filed  together. 

Business  Ciphers  and  Codes. — Many  wholesale  houses  and  manufacturing  firms  have  adopted  cipher  codes, 
by  means  of  which  the  expense  of  telegraphing  may  be  greatly  reduced.  The  method  consists  in  representing  a 
whole  clause  or  a  sentence  by  means  of  a  single  word. 

The  following  is  taken  from  one  of  these  codes  that  is  in  actual  use  by  a  large  manufacturing  establishment: 
Message  .       Code  Word 

Can  you  furnish  immediately?  Answer  by  telegram Aback. 

Ship  as  soon  as  possible Abate. 

Ship  at  once  the  machine  ordered  for Abating. 

When  can  you  ship  ? Abess. 

How  soon  can  you  furnish  ? Ablude. 

Will  ship to immediately Abhor. 

From  the  above  it  will  be  readily  seen  how  both  time  and  money  may  be  saved  by  those  who  transact 
much  business  by  telegraph. 

Insurance. — Most  business  men  protect  themselves  against  severe  loss  from  fire  by  insuring  their  stock  of 
merchandise  or  other  property,  which,  may  be  subject  to  such  loss.  The  rates  charged  by  the  insurance  company 
usually  depend  upon  the  location  of  the  business,  the  amount  of  firerisk,  the  nature  of  the  business,  and  other 
conditions.  As  a  rule,  insurance  companies  will  not  insure  property  for  its  full  value,  for  the  reason  that,  in 
this  case,  the  owners  might  be  tempted  to  destroy  it  by  fire  for  the  purpose  of  collecting  the  insurance.  If 
property  is  insured  in  several  companies,  the  loss  in  case  of  fire  is  apportioned  among  them  in  accordance  with 
the  amounts  of  the  several  policies.  Insurance  policies  are  usually  taken  out  a  certain  rate  per  year  of  the 
amount  insured,  but  it  is  often/ desirable  to  insure  quantities  of  merchandise  at  a  certain  rate  per  day,  as  where 
the  merchandise  is  in  transit  or  stored  in  warehouse.  Warehouse  charges  sometimes  include  insurance.  As  a  rule, 
insurance  charges  are  treated  as  a  part  of  the  Expense  account,  but  if  special  insurance  has  been  effected  on 
merchandise,  the  charge  is  usually  made  against  the  Merchandise  account. 

An  insurance  policy  is  a  contract,  and  it  is  important  that  the  person  insured  should  observe  all  the  conditions 
of  the  contract;  otherwise,  in  case  of  fire,  he  may  lose  the  entire  amount  of  his  policy. 

Assignment  of  Bill  of  Lading. — In  the  case  of  goods  bought  for  shipment,  the  shipper  often  assigns  the  ship- 
ping receipt,  or  bill  of  lading,  to  a  bank  as  security  for  a  loan  of  money  with  which  he  makes  necessary  pay- 


226  VARIOUS   BOOKKEEPING   METHODS   AND   REQUIREMENTS 

ments  on  the  shipments,  advance  freight  charges,  etc.  In  this  case,  the  bank  really  holds  possession  of  the 
goods  as  security  for  the  payment  of  the  loan  when  the  goods  are  sold.  The  bill  of  lading  is  then  forwarded 
by  the  bank  to  the  commission  merchant  who  receives  the  goods,  the  proceeds  being  remitted  to  the  bank, 
and  the  balance  due  the  shipper  being  placed  to  his  credit.  Jobbers  or  commission  dealers,  with  a  limited  amount 
of  capital,  are  enabled,  by  the  assignment  of  bills  of  lading  in  this  manner,  to  do  a  larger  volume  of  business 
than  they  could  do  otherwise.  There  is  no  material  difference  between  a  bill  of  lading  and  an  ordinary  shipping 
receipt.  .  ■, 

Use  of  the  Deposit  Slip.^Banks  differ  as  to  the  manner  in  which  they  have  their  depositors  make  out 
deposit  slips.  Sometimes  special  instructions  are  given  in  the  Pass  Book  or  on  the  deposit  slips.  If  different  kinds 
of  deposits  are  made,  these  should  be  itemized  on  the  deposit  slip,  as  gold,  silver,  currency,  etc.  If  checks  are 
deposited,  the  bank  upon  which  they  are  drawn  should  be  specified  either  by  name  or  Clearing  House  number, 
according  to  the  usage  of  the  bank  in  which  the  deposit  is  made. 

Drafts  Including  Exchange. — Drafts  are  sometimes  drawn  so  that  the  drawee  besides  paying  the  amount 
of  the  draft  pays  the  exchange,  or  charge  of  the  bank  for  cashing  or  collecting  the  draft. 

To  draw  a  draft  in  this  way,  add  the  words  "with  exchange"  after  the  name  of  the  drawee;  thus,  "Pay  to 
R.  Jones  with  exchange  Fifty  Dollars."  Sometimes  the  words  "With  Exchange"  are  written  in  a  bold  hand  or 
stamped  at  the  top  of  the  draft. 

Money — As  stated  in  Chapter  I,  all  amounts  in  bookkeeping  are  expressed  in  the  current  money  of  the  country 
in  which  the  accounts  are  kept.  In  the  United  States  and  Canada,  this  money  consists  of  dollars  and  cents, 
and  is  known  as  money  of  account.  By  "legal  tender  money"  is  meant  any  money  that  the  law  declares  may  be 
legally  offered  or  tendered  for  the  discharge  of  a  debt. 

Bank  Note. — Everything  that  is  a  legal  tender,  is  money,  but  some  money  is  not  a  legal  tender.  Thus, 
bank  notes  are  money,  but  not  a  legal  tender.  Checks,  drafts,  etc.,  are  often  used  for  the  payment  of  debts 
or  the  purchase  of  property,  but,  being  unregulated  by   law,  are  not  money. 

Paper-Money. — Government  notes,  Gold  and  Silver  Certificates,  and  other  forms  of  public  indebtedness  com- 
monly circulate  as  legal  tender  money. 

The  Paper  Money  of  the  United  States  consists  of  Treasury  Notes,  or  "Greenbacks"  (legal  tender),  also  Gold 
and  Silver  Certificates  and   National  Bank  Notes  (payment  secured  by  the  government). 

Bills  in  this  money  are  issued  for  various  amounts,  but  never  for  a  smaller  sum  than  $1. 

Coin. — The  Standard  Coin  of  the  United  States  is  at  present  the  Gold  Dollar,  weighing  25.8  grains.  The  Silver 
Dollar  weighs  412  3^2  grains. 

The  weight,  material,  and  denominations  of  United  States  coins  are  regulated  by  Congress. 

Gold  Coins  are  composed  of  Standard  Gold,  which  consists  of  nine  parts  pure  gold  and  one  part  alloy;  the 
latter  is  composed  of  copper  and  silver,  the  silver  not  to  exceed  Vio  of  the  alloy. 

Silver  Coins  are  composed  of  Standard  Silver,  which  consists  of  nine  parts  pure  silver  and  one  part  pure 
copper. 

The  weight  of  the  pure  silver  in  a  silver  dollar  is  at  present  about  sixteen  times  the  weight  of  the  pure 
gold  in  a  gold  dollar.  Hence  the  expression  "16  to  1,"  so  much  used  in  current  coinage  discussion.  The  frac- 
tional silver  coins,  that  is,  the  silver  coins  of  a  denomination  less  than  $1,  are  not  a  legal  tender  for  sums  greater 
than  $5.  The  government  replaces  all  torn,  worn,  or  mutilated  bills  with  new  bills  upon  application.  This  is 
usually  attended  to  by  the  banks,  which  put  aside  such  bills  until  a  considerable  quantity  is  on  hand,  when  they 
are  forwarded  to  the  Sub-Treasury  to  be  replaced  with  new  bills. 

Transmission  of  Money. — It  has  been  estimated  that  more  than  ninety-five  per  cent  of  our  foreign  and  do- 
mestic commerce  is  carried  on  without  the  direct  payment  of  money  by  the  buyer  to  the  seller.  The  most  of  this 
business  is  transacted  by  means  of  checks,  drafts,  bills  of  exchange,  certified  checks,  etc.,  with  the  use  of  which 
the  student  is  already  familiar.  There  are,  however,  a  number  of  other  means  of  transmitting  money.  Among 
these  are   Postoffice  Money  Orders,   Express  Orders,  Telegraph  Orders,  and  Letters  of  Credit. 

Postoffice  Money  Orders. — At  certain  specified  post  offices  throughout  the  country,  persons  may  buy  "Post- 
office  Money  Orders,"  these  orders  to  be  remitted  to  some  other  office  for  collection. 

The  postoffices  that  are  allowed  to  issue  and  pay  such  orders,  are  classified  into  "Money  Order  Offices"  and 
"Limited  Money  Order  Offices."  The  maximum  amount  for  which  a  single  money  order  may  be  issued  at  an  office 
designated  as  a  "Money-  Order  office,"  is  $100,  and  at  an  office  designated  as  a  "Limited  Money  Order  Office,"  $5. 
When  a  larger  sum  is  to  be  sent,  additional  orders  must  be  obtained.  But  postmasters  are  instructed  to  refuse 
to  issue  in  one  day  to  the  same  remitter,  and  in  favor  of  the  same  payee,  on  any  one  postoffice  of  the  fourth 
class,  money  orders  amounting  in  the  aggregate  to  more  than  $300,  as  such  office  might  not  have  funds  sufficient 
for  immediate  payment  of  any  large  amount.     Fractions  of  a  cent  are  not  to  be  introduced. 

If  the  payee  of  a  money  order  is  unknown  personally  to  the  postmaster,  he  must  be  identified  before  the 
amount  will  be  paid;  but  at  his  own  risk,  the  sender  of  the  money  may  waive  this  identification  if  he  thinks  it 
will  cause  inconvenience  to  the  payee. 

Money  orders  are  payable  only  to  the  person  designated  in  the  application,  unless  the  order  has  been  formally 
transferred.     A  blank  for  this  purpose  is  printed  on  the  back  of  the  order. 

Registered  Letter. — This  is  a  means  provided  by  the  government  for  securing  the  delivery  to  the  right  persop, 
of  money  or  other  valuable  packages  through  the  mails. 

The  person  sending  the  package  or  letter  receives  from  the  postmaster  a  receipt  for  the  package.  Each  post- 
master or  other  postal  official  through  whose  hands  the  package  passes,  is  required  to  receipt  for  it  to  the  official 
from  whom  he  received  it.  This  greatly  decreases  the  chances  of  its  being  lost  in  transit.  A  registered  package 
requires  eight  cents  additional  postage;  which  is  the  only  charge  for  registering. 


VARIOUS   BOOKKEEPING   METHODS   AND    REQUIREMENTS  227 

Express  and  Telegraph  Orders. — Money  may  be  transmitted  through  the  leading  express  and  telegraph  com- 
panies in  the  same  general  manner,  as  through  the  postoffice.  A  higher  rate  is  charged  for  these  orders,  but 
they  may  be  secured  for  larger  amounts. 

The  W.  U.  Telegraph  Company  charges  one  per  cent  on  all  orders  over  $25  and  twenty-five  cents  for  smaller 
sums.  In  addition  to  this  charge  the  person  buying  the  telegraph  order  must  pay  for  two  full-rate  messages  of 
fifteen  words  each. 

Letters  of  Credit. — When  first  introduced,  these  were  merely  letters  of  introduction,  given  by  banks  or  lead- 
ing business  houses  to  their  customers  or  friends  who  contemplated  going  to  foreign  countries.  The  letter  included 
an  order  for  funds  to  be  paid  to  the  bearer  by  the  bank  or  firm  to  whom  the  letter  was  addressed. 

Now  "Circular  Letters  of  Credit"  are  regularly  issued  by  banks  to  any  one  who  will  pay  for  them.  They 
enable  a  traveler  to  obtain  funds  from  any  leading  bank  in  any  part  of  the  world,  in  the  most  convenient  and 
safest  way,  putting  him  in  the  possession  of  the  money  of  whatever  country  he  visits,  without  the  necessity  of 
carrying  large  amounts  of  the  currency  of  different  countries  on  his  person. 

For  purposes  of  identification,  the  person  receiving  the  letter  of  credit  is  required  to  place  his  signature  upon 
it  when  issued. 

Borrowing  Money. — When  it  is  desirable  for  a  business  firm  to  increase  its  capital  by  borrowing  money,  a 
number  of  methods  may  be  employed.  The  common  one  of  discounting  the  firm's  paper  at  the  bank  has  already 
been  exemplified  in  the  student's  previous  work.  This  method  is  commonly  employed  for  short  term  loans,  but 
these  are  often  secured,  especially  in  the  case  of  well-known  and  reliable  firms,  by  an  arrangement  through  which 
the  firm  is  permitted  temporarily  to  overdraw  its  bank  account. 

When  it  is  desired  to  obtain  a  loan  for  a  longer  period,  as  for  several  years,  the  firm  usually  applies  to 
a  loan  agency,  or  trust  company,  for  a  permanent  loan  of  a  given  sum,  issuing  its  note  for  the  same,  payable  at 
whatever  time  may  be  mutually  agreed  upon.  Such  loan  agencies  invariably  exact  ample  security,  consisting 
either  of  a  mortgage  on  real  estate  or  of  a  deposit  of  "collateral,"  as  bonds,  mortgages,  or  the  like,  which  are 
kept  in  the  possession  of  the  lender,  and  which  may  be  sold  in  satisfaction  of  the  debt,  should  the  borrower  fail 
to  pay  his  note  according  to  agreement.  In  negotiating  loans  of  this  character,  it  is  customary  to  require  the 
interest  to  be  payable  periodically. 

When  a  loan  is  secured  by  a  mortgage,  it  is  usually  required  that  the  value  of  the  property  mortgaged  be 
much  greater  than  the  face  of  the  mortgage. 

Corporations  usually  borrow  money  by  issuing  and  selling  bonds.  These  are  placed  on  the  market  and  sold, 
through  brokers,  at  the  financial  money  centers  of  the  country.  These  bonds  may  or  may  not  be  secured  by 
mortgages  of  the  company. 

Classification  of  Ledgers. — For  the  purpose  of  classifying  the  accounts  and  the  business  and  giving  additional 
information  and  keeping  private  certain  information  and  localizing  mistakes,  many  business  houses  use  a  Purchase 
Book  and  a  Purchase  Ledger,  and  a  Sales  Book'  and  a  Sales  Ledger,  a  General  Ledger  and  a  Private  Ledger. 

The  Sales  Ledger  contains  a  record  of  all  their  sales  whether  on  account  or  otherwise.  The  Purchase  Ledger 
contains  a  record  of  all  their  purchases  whether  on  account  or  otherwise. 

The  General  Ledger  contains  a  record  of  accounts  not  in  the  Sales  or  Purchase  or  Private  Ledgers.  The 
Private  Ledger  contains  such  accounts  as  the  proprietor  does  not  want  the  bookkeeper  to  know. 

The  bookkeeper  then  opens  an  Accounts  Payable  account  and  an  Accounts  Receivable  account  in  the  Gen- 
eral Ledger.  (These  accounts  are  sometimes  opened  in  the  Purchase  and  the  Sales  Ledgers  respectively,  thus 
making  each  ledger  self-balancing.)  He  then  posts  the  sales  to  customers  from  the  Sales  Book  to  the  Debit  of 
each  customer's  account  in  the  Sales  Ledger,  and  the  payments  of  customers  from  the  Cash  Book  (or  other 
medium)  to  the  Credit  of  the  respective  customers'  accounts  in  the  Sales  Ledger.  He  posts  the  total  sales  from 
the  Sales  Book  to  the  debit  of  Accounts  Receivable  account  and  to  the  credit  of  the  Mdse  account  in  the  Gen- 
eral Ledger. 

Then  the  difference  between  the  debit  side  of  the  Accounts  Receivable  account,  as  made  up  of  the  postings 
of  the  total  sales  from  the  Sales  Book,  and  the  credit  side  of  the  Accounts  Receivable  account  as  made  up  of  the 
postings  from  the  Cash  Book  (or  other  medium),  will  have  to  equal  the  amount  yet  due  from  the  customers. 
This  test  enables  the  bookkeeper  to  determine,  in  case  of  a  mistake,  whether  the  mistake  is  in  Accounts  Re- 
ceivable. 

In  like  manner,  the  bookkeeper  opens  an  account  in  the  General  Ledger  with  Accounts  Payable.  He 
then  posts  the  several  purchases  from  the  Purchase  Book  to  the  credit  of  the  respective  creditors'  accounts  in 
the  Purchase  Ledger,  and  the  payments  to  the  creditors  from  the  Cash  Book  (or  other  medium)  to  the  debit  of 
the  respective  creditors'  accounts  in  the  Purchase  Ledger.  He  posts  the  total  purchases  from  the  Purchase  Book- 
to  the  debit  of  the  Mdse  account  in  the  General  Ledger,  and  to  the  credit  of  Accounts  Payable  in  the  General 
Ledger. 

Then  the  difference  between  the  debit  side,  of  Accounts  Payable  account,  as  made  up  of  the  several  pay- 
ments to  creditors,  which  payments  are  posted  from  the  Cash  Book  (or  other  medium)  to  the  debit  of  that  ac- 
count, and  the  credit  side  of  Accounts  Payable,  as  made  up  of  the  several  postings  of  totals  from  the  Purchase 
Book,  will  equal* the  balance  due  creditors  as  shown  by  the  balances  in  the  Purchase  Ledger.  If  these  balances 
equal,  the  mistake  is  not  in  Accounts  Payable. 

Instead  of  Accounts  Receivable,  some  bookkeepers  open  an  account  in  the  General  Ledger  with  Accounts 
Receivable  Controlling  Account,  or  Sales  Ledger  Controlling  Account,  or  Customers'  Ledger  Controlling  Account,  of 
Debit  Ledger  Controlling  Account,  or  Sold  Ledger  Controlling  Account;  and  instead  of  Accounts  Payable,  they 
open  an  account  in  the  General  Ledger  with  Accounts  Payable  Controlling  Account,  or  Purchase  Ledger  Control- 


228 


VARIOUS   BOOKKEEPING   METHODS   AND    REQUIREMENTS 


ling  Account,  or  Creditors'  Ledger  Controlling  Account,  or  Credit  Ledger  Controlling  Account,  or  Bought  Ledger 
Controlling  Account. 

The  advantages  of  classifying' the  Ledgers  in  this  way  will  be  readily  apparent. 

By  looking  at  the  Sales  Ledger  Controlling  Account  (or  whatever  other  name  it  may  be  called)  the  manager 
can  see  not  only  the  total  sales  of  the  business,  but  the  balance  of  the  account  shows  him  the  amount  yet  due 
from  customers,  what  per  cent  of  his  sales  are  paid  for,  etc.  By  looking  at  the  Purchase  Ledger  Account,  he  can 
see  not  only  his  total  purchases,  but  the  balance  of  the  account  gives  the  amount  yet  due  creditors.  And  be- 
sides giving  valuable  detailed  information  as  to  the  condition  of  the  business,  such  classification  enables  the 
bookkeeper  to  locate  a  mistake  more  readily.  It  also  enables  the  bookkeeper  to  determine  whether  his  Ledger 
is  in  balance  without  writing  off  the  Ledger  accounts. 

To  facilitate  the  carrying  out  of  such  classification,  the  Cash  Book  should  be  specially  ruled  with  a  Cus- 
tomers' or  Sales  Ledger  and  a  General  Ledger  column  on  the  debit  side,  and  a  Creditors'  or  Purchase  Ledger 
and  a  General  Ledger  column  on  the  credit  side.  Such  other  columns  should  be  ruled  as  will  facilitate  the  classi- 
fication of  accounts  and  reduce  the  postings.     The  Journal  should  also  be  provided  with  special  columns. 

Cash  Purchases  or  Cash  Sales  should  be  carried  to  the  Purchase  or  Sales  Ledger,  otherwise  the  record  would 
not  be  complete,  and  also  because  the  aggregate  purchases  determine  in  a  large  measure  what  terms  shall  be  ex- 
tended to  creditors.  Creditors  are  often  given  a  special  agreement  of  an  allowance  of  different  rates  of  discount 
based  on  the  total  purchases  for  the  year,  varying  with  different  houses  and  under  different  conditions  about 
as  follows:  1%  on  a  total  yearly  purchase  of  $2,000  to  $4,000;  2%  if  from  $4,000  to  $5,000;  3%  from  $5,000  to 
$10,000;  4%  on  $10,000  to  $15,000,  etc. 

The  Student's  Ledger  may  be  sectioned  and  part  used  for  Purchase  Ledger,  part  for  Sales  Ledger,  and  the 
rest  for  General  Ledger. 

Ledgers  are  often  further  classified  into  City  Ledgers,  Country  Ledgers,  etc.,  and  the  sectionalization  of  the 
Ledger,  and  the  raising  of  controlling  accounts,  and  the  summation  of  accounts,  are  often  carried  much  further 
than  here  suggested.  When  several  bookkeepers  are  employed,  the  sectionalization  of  the  Ledgers  and  the  raising 
of  controlling  accounts  (or  making  the  Ledgers  self-balancing)  is  indispensible. 

SALES   LEDGER 


Date 


T.  B.  LARKINS,       12-14  E.  Washington  Street,       INDIANAPOLIS,  IND. 

Folio  ,  Date  Folio 


19 

19 

Jan. 

6 

S 

6 

1 

7 

95 

Jan. 

10 

C 

5 

* 

1 

7 

95 

8 

s 

9 

2 

2 

50 

12 

C 

7 

2 

2 

50 

10 

s 

15 

4 

0 

C.  W.  DICKEY,        120  Wabash  Avenue,        CHICAGO,  ILL. 


Date 

Folio 

Date 

Folio 

19 

19 

Jan. 

7 
10 

S 

S 

6 
9 

2 
3 

0 
2 

0 
5 

80 

Jan. 

10 

c 

5 

2 

0 

0 

80 

PURCHASE   LEDGER 


Date 


SAMUEL  WALLACE, 
Folio 


70  Dexter  Street, 

Date 


PHILADELPHIA,  PA. 

Folio 


19 

19 

Jan. 

2 

J 

3 

1 

"4 

0 

0 

Jan. 

1 

Balance 

G 

0 

0 

18 

C 

9 

2 

0 

0 

12 

P 

12 

2 

0 

0 

Credit. — The  "Credit  System"  so-called,  enters  very  largely  into  mercantile  transactions  of  the  present  day. 
In  retail  business,  it  is  a  purely  personal  matter  between  buyer  and  seller,  and  few  general  requirements  are 
observed.     In  wholesaling,  however,  there  are  some  usages  and  requirements  that  are  quite  general. 

Most  large  concerns  employ  a  specialist  who  is  known  as  a  "credit  man."  It  is  this  person's  duty  to  exercise 
careful  supervision  over  all  qredits  allowed  by  the  firm. 


MERCANTILE  OR  COMMERCIAL  AGENCIES  229 

The  amount  of  credit  that  may  be  allowed  to  a  buyer,  depends,  as  a  rule,  upon  his  "credit  rating"  as  pub- 
lished through  the  books  of  the  standard  mercantile  agencies.     See  "Mercantile  or  Commercial  Agencies." 

Quite  often,  however,  a  larger  credit  is  given,  the  amount  depending  upon  circumstances.  Many  firms  before 
allowing  credit,  especially  in  the  case  of  a  customer  without  a  "rating"  require  the  buyer  to  fill  out  a  "Property 
Sheet."  This  is  a  detailed  statement,  setting  forth  the  amount  and  character  of  the  buyer's  assets.  Should  the 
buyer  make  out  a  false  statement,  he  would  be  liable  to  prosecution  for  "obtaining  goods  under  false  pretenses." 


CHAPTER   VII. — riercantile  or  Commercial  Agencies 

These  are  institutions  established  for  the  promotion  and  protection  of  trade.  They  emp'oy  travelers  who 
aim  to  cover  the  country  twice  a  year  and  procure  of  individuals,  firms,  and  corporations,  information  as  to  their 
assets  and  liabilities,  and  from  other  persons  as  to  the  correctness  of  these  statements,  and  the  character,  habits, 
and  ability  of  the  persons  or  concerns  reported.  They  have  attorneys  in  almost  every  county  and  important  town, 
and  correspondents  at  almost  every  postofnce,  who  answer  inquiries  personally  to  the  traveling  agent  and  by  mail 
or  telegraph  to  the  district  offices. 

The  travelers  do  not  consult  individuals,  alone;  but  the  tax  lists,  deed,  mortgage,  and  judgment  records,  etc. 
On  each  concern  engaged  n  business  the  travelers  write  up  as  concise  and  as  full  a  history  of  the  means,  character, 
habits,  ability,  etc.,  as  possible. 

Suppose  a  merchant  in  Morristown,  Tenn.,  desires  to  buy  goods  that  can  be  purchased  to  the  best  advantage 
of  a  firm  in  Cincinnati,  Ohio.  He  forwards  his  order  to  the  house  dealing  in  the  desired  goods;  the  credit  man 
of  the  house,  finding  that  he  had  an  order  from  a  new -customer  of  whom  he  knows  nothing,  applies  at  the  Mer- 
cantile or  Commercial  Agency  in  Cincinnati  for  information  regarding  the  man  at  Morristown,  and  if  the  infor- 
mation is  satisfactory,  he  fills  the  order  promptly;  but  if  it  is  not  satisfactory,  the  goods  are  not  shipped  until 
payment  is  received  or  at  least  a  sufficient  amount  to  justify  the  risk.  Thus  it  is  seen  how  the  Commercial  or  Mer- 
cantile Agency  promotes  as  well  as  protects  trade. 

The  agencies  have  the  entire  country  divided  into  districts.  R.  G.  Dun  &  Co.,  the  Mercantile  Agency,  has 
about  one  hundred  and  forty  districts,  Bradstreet's  has  about  ninety  districts,  and  the  John  W.  Ealy  Company  has 
about  twelve  districts.  Each  district  has  an  office  at  the  most  important  commercial  center  in  it,  and  each 
agency  has  its  general  office  in  New  York  City,  where  the  various  districts  send  duplicates  of  all  their  information. 
The  district  offices  also  send  duplicates  of  their  information  to  the  officers  of  the  surrounding  districts. 

The  agencies  publish  Reference  Books  quarterly,  that  is  to  say,  in  January,  March,  July,  and  September  of 
each  year.  These  reference  books  are  published  in  several  editions.  The  General  Reference  Book  contains  the 
names  of  all  persons  engaged  in  business  in  the  United  States,  Canada,  Alaska,  and  ,'mportant  coast  islands.  The 
Western  Reference  Book,  as  its  name  implies,  contains  the  Western  States;  and  the  Southern  Reference  Book,  the 
Southern  States.  State  editions  are  published,  but  are  rented  only  to  concerns  subscribing  to  regular  editions  named. 
Houses  concerned  in  Southern  trade  only,  subscribe  for  the  Southern  edition;  those  in  the  West,  only  to  the  Wes- 
tern edition;  and  the  large  concerns  taking  the  General  Edition  are  interested  all  over  the  country.  A  Reference 
Book  is  better  understood  by  glancing  at  the  page  from  a  pocket  or  State  edition  given  in  connection  with  the 
chapter. 

A  Notification  Sheet  is  published  daily  by  the  New  York  offices  and  also  by  some  of  the  district  offices; 
but  the  district  manager  publishes  the  sheet  less  frequently,  some  of  them  three  times  a  week,  others  twice  a 
week,  and  some  not  more  than  once  a  week.  This  sheet  records  the  names  of  new  firms,  changes  in  old  ones,  fail- 
ures, judgments,  fires,  etc.  Usually  two  Reference  Books  annually,  the  notification  sheet,  and  the  privilege  of  mak- 
ing inquiry  for  a  hundred  detailed  reports,  go  with  a  subscription. 

The  Mercantile  Agency  of  R.  G.  Dun  &  Co.,  and  the  John  W.  Ealy  Company,  each  conduct  collection  depart- 
ments. Dun  &  Co.  have  most  of  their  attorneys  under  bond.  Bradstreet's  does  not  conduct  special  collection 
departments,  but  either  forwards  a  client's  claim  to  an  attorney  living  near  the  debtor,  or  gives  the  client  the 
attorney's  name  and  lets  him  forward  it  himself. 

Dun  and  Bradstreet's  do  a  general  reporting  business;  the  former  carries  a  million  or  more  firms  and  corpora- 
tions, and  their  ratings  on  the  Reference  Book,  the  latter  about  three  quarters  of  a  million;  and  the  Ealy  Company 
which  reports  for  the  Iron  and  Hardware  Trade,  carries  about  four  hundred  thousand  names  and  ratings.  Brad- 
street's is  a  corporation,  Dun  is  not  incorporated.  There  are  a  dozen  smaller  agencies,  such  as  the  Furniture  and 
Lumber  Agency,  but  those  named  are  the  principal  ones. 

In  addition  to  the  above  described  service  Mercantile  Agencies  generally  do  collecting  of  accounts  for  their 
subscribers,  besides  attending  to  other  special  matters  relating  to  credits,  some  of  which  are  as  follows: 

Special  Reports,  indicating  the  time  in  business,  capital  invested,  estimated  worth,  character,  prospects  of 
success,  etc. 

A  Letter  of  Introduction  for  the  use  of  subscribers  or  persons  employed  solely  by  them,  when  traveling,  to 
enable  them  to  make  inquiries  at  any  of  the  Offices  located  in  the  States  represented  in  the  volumes  loaned 
These  letters  will  not  be  recognized,  however,  in  cities  where  the  agency  has  a  branch. 

Issue  Pocket  Editions  of  any  of  the  States  for  the  use   of  subscribers  or  their  employees,  when  traveling. 

The  correctness  of  the  information  contained  in  the  reports  furnished  by  these  agencies  is  not  guaranteed, 
but  is  submitted,  without  prejudice,  to  its  subscribers. 


230 


MERCANTILE  OR  COMMERCIAL  AGENCIES 


The  Mercantile  Agency  of  R.  G.  Dun  &  Co. ,  and  the  John  W.  Baly  Company,  each  conduct  collection 
departments.  Dun  &  Co.  have  most  of  their  attorneys  under  bond.  Bradstreet's  does  not  conduct  special 
collection  departments,  but  either  forwards  a  client's  claim  to  an  attorney  living  near  the  debtor,  or  gives 
the  client  the  attorney's  name  and  lets  him  forward  it  himself. 

Dun  and  Bradstreet's  do  a  general  reporting  business;  the  former  carries  a  million  or  more  firms  and 
corporations,  and  their  ratings  on  the  Reference  Book,  the  latter  about  three  quarters  of  a  million  ;  and  the 
Ealy  Company,  which  reports  for  the  Iron  and  Hardware  Trade,  carries  about  four  hundred  thousand  names 
and  ratings.  Bradstreet's  is  a  corporation,  Dun  is  not  incorporated.  There  are  a  dozen  smaller  agencies, 
such  as  the  Furniture  and  Lumber  Agency,  but  those  named  are  the  principal  ones. 


INSIDE    COVER    OF    STATE 
REFERENCE   BOOK 


This  book  is  the  sole  property  of  THE 
COMMERCIAL  AGENCY;  it  is  LOANED, 
and  not  sold,  to 

Its  contents  are  STRICTLY  CONFIDEN- 
TIAL and  for  the  exclusive  use  and  ben- 
efit of  the  person  or  firm  above  mentioned, 
as  per  agreement  existing  between  us. 
Any  violation  of  this  agreement  entitles 
the  proprietors  of  the  said  agency  at  any 
time  to  reclaim  the  book,  which,  other- 
wise, is  to  be  returned  upon  the  termina- 
tion of  the  subscription. 

NOT  TRANSFERABLE. 


PART  OF  PAGE  OF  STATE 
REFERENCE  BOOK 


TICKET  OF  INQUIRY 


KEY 

The  omission  of  a  rating  is  not  in  any 
case  an  implication  upon  the  party's 
credit.  It  simply  implies  that  we  have 
not  the  information  upon  which  to  base  a 
rating. 

•tr  Indicates  Bank  or  Express  Company. 
A  Indicates   Nearest   Banking   Town  or 

Express  Company. 
©  Indicates  Dealers  in  Stoves. 

A $1,000,000  or  over. 

B 500,000  to$l,000,000 

0 250,000  to      500,000 

D 100,000  to      250.000 

E 75,000  to      100,600 

F 50,000  to        75.000 

G a5,000  to        50,000 

H 25.000  to        35,000 

K 15,000  to        25,000 

L 10,000  to        15,000 

M 5,000  to        10.000 

N 3,000  to  5,000 

0 2,000  to  3,000 

P 1,000  to  2.000 

§500  to  1,000 

300  to  500 

S No  financial  basis  for  credit. 

T Capital  unknown,  but  supposed 

to  be  quite  light. 

U $150  to  300 

V 100  or  less. 

1.  Usually  discounts  bills. 

2.  Prompt  pay. 

3.  Medium  pay. 

4.  Pays  notes,  but  slow  on  accounts 

5.  Slow  pay. 

6.  Very  slow  pay. 

7.  Credit  not  recommended  —  sell  only 

for  cash. 

8.  Bad  reputation. 

10.  Complains  of  goods  without  cause  and 

claims  deductions. 

11.  Enquire  at  office. 

12.  Cannot  ascertain  accurately  at  present 

writing. 

13.  Buys  only  in  a  small  way  from  local 

dealers  —  generally  pays  cash. 
36.  Worthy  of  confidence  —  capital    not 
considered. 

74.  Pays  when  compelled  by  law. 

75.  Borrowed  capital. 

76.  Chattel  mortgage. 

77.  No  property  within  reach  of  the  law 
00.  Recently  begun  business. 

95.  Deceased. 

86.  Out  of  business. 


TENNESSEE. 


•  Felsenthal  &  Schafer d.g.gro. 

hdw.  sto.  &  agr'l  impls       2 

Hall  Thomas gen.  store 

Middlebrook  J  S wagonmkr 

Ragland,  Collins  &  Co gen.  store  L    2 

ANDERSON,  Franklin  Co. 
Pop.  300— it— Southern  Ex. 

McNichols  Daniel gro.  hdw.  &  tin  R    3 

Thomas  &  Bros gen.  store  P    3 

BAKERVILLE,  Humphreys  Co. 
Pop.  200— A—  Waverly. 

Coffan  H.  C flour  &  saw  mills  P    3 

Smith  H  W blacksmith  V 

Williams  L  A d.g.gro.  &hdw.  N    2 

CHILHOWEE,  Blount  Co. 
Pop.  40—A—Maryville. 

Stone  &  Patterson gen.  store  Q    3 

DEER  LODGE,  Morgan  Co. 

Pop.  100— A— Sunbright. 

Cardwell  &  Scraggs hardware  M    2 

•  Smith  J.  H.  &  J.  W.  hdw.  sto.  &  tin  P    2 

EAGLE  CREEK,  Overton  Co. 
Pop.  30— A— Livingston. 

Fulton  John hardware       3 

Lawrence  J  S gen.  store  O    2 

Sensbaugh  J  H miller  O    5 

TrentGL&Son g.s.&hdw.  N    3 

Willis  D  H g.s.&  hdw.  Q    3 

FAXON,  Benton  Co. 
Pop.  45— A— Ducktown. 

Southern  Iron  Co 

(See  Nashville.) 
Wright  T gen.  store  P   8 

GRASSY  COVE.  Cumberland  Co. 
Pop.  300-A.- Spring  Citfr 


139    The  Commercial  Agency 


JOHN  A.  Mc  ALLEN 


Give  us  in  confidence,  and  for  our  exclu- 
sive use  and  benefitin  ourbusihess;  viz.,  that 
of  aiding  us  to  determine  the  propriety 
of  giving  credit,  whatever  information 
you  have  respecting  the  standing,  respon- 
sibility, etc.,  of 

Name, ... 


Business,.. 

Town,  

County, 

State, 


..Subscriber. 


4&~  Subscribers  to  sign  the  above  themselves. 
Knoxville, 1  ©„__JVo. 


CHECK  FIGURE  PROOFS  231 

CHAPTER   VI1L— Check  Figure  Proofs 

Addition. — Give  special  attention  to  addition,  as  it  is  a  very  important  part  of  your  work  and  will  re- 
quire a  great  amount  of  careful,  conscientious  practise.  Always  add  each  column  twice,  first  up  and  then  down. 
You  must  learn  to  add  rapidly  and  accurately. 

Proofs  of  Addition. — It  is  a  good  plan  to  prove  your  addition  by  some  of  the  well-known  mathematical  tests, 
such  as  the  unitate,  the  9,  the    11,  or  the   13  method. 

The  unitate  of  any  number  is  the  number  reduced  to  stand  in  one  place  or  unit's  place.  The  mathematical 
principle  employed  is  that  the  unitate  of  the  several  amounts  must  equal  the  unitate  of  their  sum.     Thus: 

The  Unitate  Method. —     $718.33  =  22=4.4  is  the  unitate  or  check  figure  of  71833 

42.19=16  =  7.7       "           "  "         "           "  4219 

634.18=22=4.4   "     "  "    "     "  63418 

39.27  =  21  =  3.3   "     "  "    "     "  3927 

511.11=  9=9.9   "     "  "    "     "  51111 


$1945.08=27=  9 

The  digits  in  the  number  71833,  adding  horizontally,  left  to  right,  or  right  to  left,  add  to  22,  but  as  one  figure 
stands  in  ten's  place,  we  add  again,  2  plus  2  equals  4*,  that  is,  4  is  the  unitate  of  71833. 

Adding  each  number  in  the  same  way,  we  get  for  the  unitates  of  the  respective  numbers  4,  7,  4,  3,  and  9. 
Adding  the  unitates  together  we  get  27,  but  again  the  2  stands  in  ten's  place,  so  we  add  2  and  7  and  we  get  9 
for  the  unitate  of  the  unitates.  The  sum  of  these  numbers  is  194508.  These  digits  added  laterally  add  to  27, 
and  2  added  to  7  equals  9,  which  is  the  unitate  of  the  sum  of  the  numbers.  If  we  had  made  an  error  in  our  addi- 
tion and  had  obtained  for  the  sum  of  all  the  numbers  184508,  the  unitate  of  this  number  is  8,  which  we  see  is  wrong 
as  it  does  not  answer  our  mathematical  principle. 

It  will  be  found  a  great  convenience,  in  case  of  interruption,  to  add  by  what  is  known  as  the  bookkeeper's 
method;  that  is,  set  out  the  full  amount  of  each  column,  on  a  piece  of  paper.     Thus: 


$  9874.19 

29 

328.85 

26 

67.98 

22 

4371.67 

24 

16 

$14642.69 

14 

The  Nine  Method. — The  9  method  is  known  as  "Casting  out  the  9 's."     The  resulting  check  figure  will  be  the 
same  as  by  the  unitate  method  except,  when  the  check  figure  is  9  by  the  unitate  method  it  is  0  by  the  9  method. 
$  718.33  casting  out    the  9's  check  figure  is  4 

42.19       "  "         7 

634.18       ' '  "       "  4 

39.27       ' 3 

511.11       "  "         "     "         "  "       "  0 

$1945.08 
Adding  the  digits  of  the  first  number  laterally,  we  say  7+1  is  8;  8+8  is  16;  but  16  is  7  more  than  9,  so 
we  drop  the  9  and  carry  the  7  to  the  next  figure  3;  7+3  is  10,  but  10  is  1  more  than  9,  so  we  drop  the  9 
and  carry  the  1  to  the  next  figure  3,  and  we  have  4  for  the  check  figure  of  71833.  Casting  the  9's  out  of  the 
other  numbers  we  have  the  check  figures  4,  7,  3,  0.  Beginning  at  the  top  of  the  column  of  check  figures  and  cast- 
ing out  the  9's  we  say,  4+7  is  11,  but  11  is  2  more  than  9,  so  we  drop  the  9  and  carry  the  2  to  the  next  figure 
4,  and  we  have  6,  carry  the  6  to  the  next  figure  3,  and  we  have  9.  Dropping  the  9,  we  have  for  the  check 
figure  of  the  check  figures  0. 

Adding  the  digits  in  the  sum,  194508  in  the  same  way,  and  dropping  the  9's,  we  have  0  for  the  check  figure 
of  the  sum;  that  is,  0  the  check  figure  of  the  check  figures  of  the  several  numbers  equals  0  the  check  figure  of 
the  sum.  The  mathematical  principle  is  that  casting  out  the  9's  of  the  several  numbers  must  leave  us  the  same 
check  figure  as  casting  the  9's  out  of  the  answer  would  give.  The  mathematical  process  is  entirely  different  from 
the  process  used  in  the  unitate  method.  In  the  9  method  we  strike  out  the  9's,  while  in  the  unitate  method  we 
do  not  strike  out  any  number  at  all,  but  reduce  the  whole  number  to  a  unitate. 

The  11  Method. — The  11  method  is  a  short  way  of  dividing  numbers  by  11,  and  the  mathematical'  principle  is 
that  the  remainders  by  dividing  the  respective  numbers  by  1 1  must  be  the  same  as  the  remainders  by  dividing  their 
sum  by  11.  Any  number  may  be  divided  by  1 1,  and  the  remainder  obtained  by  subtracting  the  sum  of  the  numbei 
in  the  ten's  place  and  every  alternate  number  from  the  sum  of  the  number  in  the  unit's  place  and  every  alter- 
nate number,  adding  11,  or  some  multiple  of  11,  when  necessary  to  make  the  subtraction. 
$  718.33  check  figure  3 
49.95       "  "         1 

59.94       ""  "       10 

511.11       "  "     '    5 


$1339.33 
In  this  proof  we  sav,  3+1  is  4,  which  is  the  sum  of  the  number  in  the  ten's  place  and  every  alternate  num- 


232 


CHECK  FIGURE  PROOFS 


ber.  Then  we  say,  34-8  is  11+7  is  18,  which  is  the  sum  of  the  number  in  unit's  place,  and  every  alternate 
number.  Then  subtracting  4  from  18.  we  get  14,  which  is  larger  than  our  unit,  11,  so  we  again  take  1,  the 
number  in  ten's  place  from  4,  the  number  in  unit's  place,  and  we  have  the  remainder  or  check  figure  3. 

In  the  next  number,  4995,  we  say  9+4  is  13,  which  is  the  sum  of  9,  the  number  in  ten's  place,  and  every 
alternate  number.  Next,  we  say  5+9  is  14,  which  is  the  sum  of  the  number  in  unit's  place  and  every  alternate 
number.  Next,  we  say  5+9  is  14,  which  is  the  sum  of  the  number  in  unit's  place  and  every  alternate  number. 
Subtracting  13  from  14,  we  get  1,  remainder  or  check  figure. 

In  the  next  number,  5994,  we  say,  9+5  is  14,  which  is  the  sum  of  the  number  in  ten's  place  and  every 
alternate  number.  Next,  we  say  4+9  is  13,  which  is  the  sum  of  the  number  in  unit's  place  and  every  alternate 
number.  Now,  as  14  is  greater  than  13,  we  cannot  subtract,  so  we  add  our  unit,  11,  to  13,  and  get  24,  and  then 
14  from  24  leaves  a  remainder  or  check  figure   10. 

In  the  next  number,  51111,  we  say,  1+1  is  2,  which  is  the  sum  of  the  number  in  ten's  place  and  every  alter- 
nate number.  Next,  we  say,  1+1+5  is  7,  which  is  the  sum  of  the  number  in  unit's  place  and  every  alternate 
number.-     Then  subtracting  2  from  7,  we  have  5,  remainder  or  check  figure. 

Then  adding  the  check  figures  3,  1,  10,  and  5,  we  get  19,  which  is  greater  than  our  unit,  11,  so  we  again 
take  the  number  in  ten's  place,  1,  from  the  number  in  unit's  place,  9,  and  we  get  8  for  remainder  or  check 
figure  of  the  check  figures. 

In  the  sum  of  these  numbers,  133933,  we  say  3+3+1  is  7,  which  is  the  sum  of  the  number  in  ten's  place  and 
every  alternate  number.  Next,  we  say  3+9+3  is  15.  Subtracting  7  from  15  we  get  8,  remainder  or  check  figure, 
which  is  the  same  as  the  remainder  we  get  by  taking  the  check  figure  of  the  check  figures  of  the  different  num- 
bers, which  proves  our  work  to  be  correct. 

The  13  Method. — -The  13  method  is  a  short  way  of  dividing  a  number  by  13.  This  is  easily  accomplished  by 
making  a  table  of  all  the  multiples  of  13  in  numbers  of  three  places. 

The  13  Table 


o 

1 

2 

3 

4 

5 

6 

7 

8 

9 

013 

104 

208 

312 

403 

507 

611 

702 

806 

910 

026 

117 

221 

325 

416 

520 

624 

715 

819 

923 

039 

130 

234 

338 

429 

533 

637 

728 

832 

936 

052 

143 

247 

351 

442 

546 

650 

741 

845 

949 

065 

156 

260 

364 

455 

559 

663 

754 

858 

962 

078 

169 

273 

377 

468 

572 

676 

767 

871 

975 

091 

183 

286 

390 

481 

585 

689 

780 

884 

988 

195 

299 

494 

598 

793 

897 

Explanation  of  the  Table. — The  top  row  of  figures  running  from  0  to  9  inclusive,  is  the  guide  row.  Notice 
that  1  in  the  guide  row  stands  over  all  the  multiples  in  100,  2  over  all  the  multiples  in  200,  and  so  on  to  9,  which 
stands  over  all  the  multiples  in  900.  If  we  wish  to  find  the  remainder  after  dividing  847  by  13,  we  look  at  the 
guide  row  for  8,  then  follow  that  row  down  until  we  come  to  845,  which  is  the  next  multiple  below  847.  Taking 
the  multiple,  845,  out  of  our  number  847,  we  have  2  left,  that  is,  2  is  the  remainder  or  check  figure  by  dividing 
847  by  13. 

The  table  is  made  out  by  starting  with  13,  as  the  unit,  and  adding  13  consecutively  until  we  come  to  988, 
which  is  the  last  multiple  in  three  places.  Adding  13  to  13  gives  us  26,  adding  13  to  26  we  get  39,  and  so  on 
down  to  91.  If  we  add  13  to  91  we  get  104,  and  for  facility  in  referring  to  the  table  we  set  all  multiples  that 
fall  in  100  in  the  same  row  under  the  guide  figure  1 ;  all  numbers  in  200  under  the  guide  figure  2,  and  so  on  to  9, 
the  last  row. 

How  to  prove  our  additions  by  this  method  will  be  made  plain  by  the  following  illustration : 


$237389.40 
489.74 
753.25 
100.35 

check 
<< 

figure  4 

3 

3 

"   12 

$238732 . 74 

22 

Illustration  No.  1 

Taking  13  out  of  22,  we  have  left  9,  which  is  the  check  figure  of  the  check 
figures.  9  is  also  the  check  figure  of  the  sum  which  proves  the  correctness 
of  the  addition. 


CHECK  FIGURE  PROOFS  233 

Now,  as  our  table  was  made  out  for  all  the  multiples  in  three  places,  we  separate  the  numbers  into  periods 
of  three  figures  each,  counting  from  the  left.     Counting  from  left  to  right,  the  first  period  of  three  figures  is  237. 

Now,  starting  on  the  left,  to  divide  or  strike  out  the  13's,  we  take  the  next  multiple  under  237,  which  is 
234,  from  237.  This  leaves  3.  Taking  this  3  and  the  next  two  figures  38  to  make  our  period  of  three  figures,  and 
taking  the  multiple  338  from  338,  we  have  nothing  left.  Taking  the  next  three  figures,  940,  and  taking  the  next 
lower  multiple,  936  from  940,  we  have  4  remainder  or  check  figure  for  the  first  .number. 

Separating  the  next  number  into  periods  of  three  figures  each,  we  have  for  the  first  period  on  the  left,  489. 
Now,  subtracting  the  next  iower  multiple  481,  from  489,  we  have  left  8.  Bringing  down  the  next  two  figures,  74, 
to  the  right  of  the  8  we  have  874;  and  taking  the  next  lower  multiple  871  from  874  we  have  3  remainder  or  check 
figure  for  the  second  number. 

Taking  the  next  number  75325,  we  take  741  out  of  753  as  we  are  dividing  by  13,  and  have  left  12  remainder 
from  the  first  period  on  the  left.  Bringing  down  the  next  2  to  give  us  three  figures,  we  next  take  117  from  122, 
and  we  have  left  5.  Bringing  down  the  next  figure  5,  we  have  oo,  and  taking  the  next  lower  multiple  52  from 
55  we  have  left  3  remainder,  or  check  figure  for  the  third  number. 

Taking  the  last  number  10035  and  counting  three  figures  from  the  left,  we  have  for  the  first  period  100. 
Taking  the  next  lower  multiple  91  from  100  we  have  9  left.  Bringing  down  the  next  two  figures  35,  to  the 
right  of  9,  we  have  935,  taking  the  next  lower  multiple,  923  from  935,  we  have  left  12  remainder  or  check  figure 
for  the  fourth  number. 

Now,  as  we  are  testing  our  addition  we  add  together  the  check  figures  of  the  numbers  to  be  added.  The 
sum  of  the  check  figures  is  22.  Taking  13  out  of  22  we  have  9  left;  that  is,  9  is  the  check  figure  of  the  check 
figures. 

Now,  separating  the  sum  of  the  four  numbers  into  periods  of  three  figures  each,  we  have  for  the  first  period 
on  the  left,  238.  Taking  234,  the  next  multiple  below  238,  from  238,  we  have  left  4.  Bringing  down  the  next 
two  figures  to  the  left  of  4,  we  have  473.  Taking  the  next  lower  multiple,  468,  from  473,  we  have  5  left.  Bring- 
ing down  the  next  two  figures  27  to  the  right  of  5  in  order  to  make  a  period  of  three  figures,  we  have  527.  Tak- 
ing the  next  lower  multiple  520  from  527  we  have  7  left.  Bringing  down  the  last  figure  4  to  the  left  of  7  we  have 
74.     Taking  65  from  74  we  have  left  9  remainder  or  check  figure  of  the  sum  of  the  four  numbers. 

Last,  adding  the  check  figures  together,  we  get  22.  Taking  13  out  of  22,  we  have  9  remainder,  or  check 
figure.  Now,  since  9,  the  check  figure  found  by  dividing  the  sum  of  the  numbers  by  13,  is  the  same  as  the  re- 
mainder or  check  figure  we  had  left  after  dividing  the  sum  of  the  check  figures  of  the  several  numbers  by  13,  the 
addition  is  proved  to  be  correct. 

The  mathematical  principle  involved  is  that  the  remainder  left  after  dividing  the  numbers  to  be  added  by 
13,  must  be  the  same  as  the  remainder  left  after  dividing  their  sum  by  13. 

Illustration  No.  2 

$10000.00  check  figure  1 

6878.42   "     "  12 

16.92   "     "  2 

.03   "     "  3 

1485.00   "     "  1 


$18380.37  19 

This  illustration  presents  no  new  feature  except  in  finding  the  check  figure  for  $10,000.00,  the  first  period  of 
three  figures  on  the  left  is  100.  Taking  91  out  of  100,  we  have  9  left.  We  have  no  significant  figure  to  bring  down. 
Bringing  down  the  two  ciphers  to  the  right  we  have  900.  Taking  897  from  900  we  have  3  left.  Bringing  down 
the  two  ciphers  again,  we  have  300.     Taking  299  from  300  we  have  1  remainder  or  check  figure. 

The  next  new  feature  in  the  second  illustration  is  in  getting  the  check  figure  of  the  3  cents.  As  the  3 
stands  in  the  last  period  and  is  below  our  unit,  it  could  not  be  divided  by  13,  and,  therefore,  measuring  by  the 
unit  13,  there  would  be  a  number  (in  this  case  3)  that  cannot  be  divided  by  our  unit,  and  it  must  stand  out  with 
the  other  check  figures. 

These  check  figure  proofs  apply  in  all  arithmetical  operations,  and  to  all  numbers  except  common  fractions. 
There  is  no  check  figure  method  that  will  apply  to  common  fractions  because  they  are  not  based  on  the  scale 
of  10.  These  methods  apply  to  decimal  fractions,  but  care  must  be  taken  to  see  that  all  decimals  are  of  the  same 
denomination. 

In  proving  multiplication,  the  check  figures  of  the  multiplicand  and  the  multiplier  must  be  multiplied  together. 
If  we  multiply  1485  by  1415  we  get  as  the  product  2101275.  The  check  figure  of  1485  is  3,  and  the  check  figure 
of  1415  is  11.  The  two  check  figures  multiplied  together  give  us  33,  and  subtracting  26  from  33,  we  get  7.  The 
check  figure  of  2101275  is  7,  which  proves  that  the  multiplication  is  correct. 

Advocate?  of  the  13  method  do  not  attempt  to  commit  the  table  to  memory,  but  when  working,  keep  it  in 
some  convenient  place  for  reference. 

The  13  method  is  the  most  perfect  proof  of  arithmetical  operations  known  to  mathematicians.  To  make  a 
mistake  that  would  not  be  caught  by  this  method  the  bookkeeper  would  have  to  make  a  mistake  in  three  places, 
and  the  mistake  would  have  to  be  an  exact  multiple  of  13.  For  this  reason  and  for  the  reason  that  it  is  so  readily 
applied,  it  is  preferred  by  many  accountants,  bookkeepers,  and  business  men. 

While  it  is  of  great  value  in  testing  the  arithmetical  operations,  its  greatest  value,  perhaps,  is  in  preventing 
transpositions  and  transplacements  in  posting.  If  this  method  is  applied  it  is  well-nigh  impossible  to  post  an  amount 
wrong.  If  this  method  is  used  a  figure  trial  balance  may  be  had  every  night  or  at  any  desired  period  by  adding 
only  the  debit  and  the  credit  check  figure  columns. 


234 


CHECK  FIGURE  PROOFS 


To  apply  any  check  figure  method  in  bookkeeping,  an  extra  column  has  to  be  ruled  for  the  debit  and  the 
credit  check  figure  columns  in  all  books  of  original  entry,  and  in  the  Ledger.  It  must  be  remembered  that  the  cent 
column  represents  the  first  two  figures  of  the  period,  whether  ciphers  are  written  in  the  column  or  not.  Thus 
$39  must  be  written  or  thought  of  as  $39.00  in  finding  the  check  figure. 

When  the  journal  entry  is  made  (or  entry  in  any  book  of  original  entry)  look  at  the  table  and  set  the  check 
figure  in  its  column.  Then  after  the  entry  is  posted,  look  again  at  the  table  and  set  the  check  figure  in  its  column 
in  the  Ledger.  This  will  prevent  transpositions  or  transplacements  that  might  not  otherwise  be  noticed.  Check 
figures  are  never  posted.     The  radical   (  V  )   is  generally  used  to  indicate  the  check  figure  column. 

Whether  to  use  these  check  figure  proofs  in  his  schoolwork  is  left  to  the  judgment  of  the  teacher. 

The  following  illustration  will  exemplify  how  any  check  figure  method  may  be  applied.  Notice  that  the  total 
of  the  check  figures  on  the  debit  side  of  Cash  account  add  to  25  and  on  the  debit  side  of  Mdse  to  16,  and  the 
two  to  41,  check  figure  2.  Total  of  check  figures  on  credit  side  of  Cash  account  is  16,  and  total  of  check  figures 
on  credit  side  of  Mdse  is  25,  .and  the  two  are  41,  check  figure  2.  This  gives  you  figure  trial  balance,  and  you  have 
had  to  add  only  one  column  of  figures  on  each  side. 

The  first  of  the  following  illustrations  shows  the  regular  journal  ruling  except  that  it  has  an  extra  column  for 
check  figures  for  the  debit  amounts  and  another  for  the  credit  amounts.  The  second  and  the  third  illustrations 
show  the  regular  ledger  ruling  with  extra  column  on  both  sides  for  the  check  figures. 


Page  61 


19 
Jan. 

1 

LF 
14 

Cash 

V 
9 

217 

32 

V 

18 

Mdse 

9 

217 

32 

2 

14 

Cash 

0 

39 

18 

Mdse 

0 

39 

5 

18 

Mdse 

9 

485 

25 

Cash 

9 

485 

25 

6 

18 

Mdse 

7 

166 

60 

Cash 

7 

166 

60 

7 

14 

Cash 

10 

95 

18 

Mdse 

10 

95 

8 

14 

Cash 

6 

1329 

18 

8 

18 

Mdse 

6 

1329 

18 

41 

2332 

35 

41 

2332 

35 

CASH 

I 

'age   1 1 

19 
June 

1 

LF 
61 

V 

9 

217 

32 

19 
June 

5 

LF 
61 

V 
9 

485 

25 

2 

61 

0 

39 

■ 

7 

61 

7 

166 

60 

7 

61 

10 

95 

8 

61 

6 

1329 

18 

MERCHANDISE 


Page  18 


19 
June 

5 

L  F 
61 

V 

9 

485 

25 

19 
June 

1 

LF 
61 

V 

9 

217 

32 

6 

61 

7 

166 

60 

2 

61 

0 

39 

7 

61 

10 

95 

8 

61 

6 

1329 

18 

PAY  ROLLS 


23; 


The  17  and  the  19  Check  Figures. — The  17  and  the  19  Check  Figure  Methods  are  handled  like  the  13  Method. 

A  table  for  the  17  method  is  made  out,  containing  all  the  multiples  of  17  in  three  places.  Then  the  process 
is  exactly  the  same  as  the  13  except  the  multiples  of  17  are  used  instead  of  13.  A  table  is  made  out  of  all  the 
multiples  of  19  in  three  places.  Then  the  process  is  exactly  the  same  as  the  13  except  the  multiples  of  19  are 
used  instead  of  13. 

The  17  and  the  19,  together  with  the  unitate,  the  9,  the  11,  and  the  13  methods,  explained  on  pages  331- 
234,  are  the' methods  that  should  be  used  to  prove  addition,  subtraction,  multiplication  and  division.  The  11  or 
the  13  may  be  used  in  posting  to  prevent  transpositions  and  transplacements.  The  99,  the  101,  the  999  and  the 
1001,  explained  under  "How  to  Find  Errors  in  Trial  Balances,"  page  238,  should  be  used  to  find  the  number 
transposed  or  transp laced. 


CHAPTER  IX.— Pay  Rolls 

Accounts  with  Employees. — In  most  business  concerns  it  is  found  necessary  to  employ  various  persons 
to  work  for  a  stated  salary.  The  employees  may  be  few  or  many  according  to  the  nature  and  character  of  the  busi- 
ness. Where  there  are  but  two  or  three  employed,  accounts  with  each  may  be  kept  in  the  Ledger,  these  accounts 
being  credited  periodically  with  the  salary  allowed,  expense  being  debited.  When  anything  is  paid  to  the  em- 
ployees, they  are  debited,  and  Cash,  or  whatever  is  paid  them,  credited.  Where  there  are  many  employees, 
this  method  would  involve  too  much  work  for  the  bookkeeper;  hence,  in  such  establishments,  it  is  customary  to 
keep  variously  ruled  books,  as  Pay  Rolls,  Time  Books,  etc.  The  names  of  the  employees  are  written  in  these  books, 
and  opposite  to  these  is  entered  a  record  of  the  time  they  work  during  each  month  or  week,  the  salary  received, 
amount  paid,  etc.     When  settlement  is  made  with  the  employees  at  the  end  of  the  week,  or  month,  as  the  case 


Time  Book  for  the  Month  of 


19_ 


NAMES. 


22  23 


24  25 


27  28 


Total 

Rate 
Par  cay 

AMOUNT 

Time 

s 

Cts. 

— 

Time,  Week  Ending  Saturday 


19 Denominations  Required  or  Change  List 


NAMES 

S 

M 

T 

w 

T 

F 

S 

Total 
Time 

Rate 
Per  Hr. 

AMOUNT 

$20 

$10 

$5 

$1 

50^5  ' 

25^ 

lOf 

5^ 

\<P 

$ 

Cts 

John  Smith 

8 

8 

10 

11 

8 

8 

55  y2 

62  y2 

34 

69 

1 

1 

4 

1 

1 

1 

4 

Abe  Harker 

9 

7 

7 

10 

9 

9 

53  H 

43  M 

23 

41 

1 

3 

1    . 

1 

1 

1 

James  Farley 

7 

8 

9 

11 

10 

8 

56 

35% 

19 

95 

1 

1 

4 

1 

1 

2 

Sam  Daley 

8 

7 

9 

8 

11 

7 

52 

34% 

17 

88 

1 

1 

2 

1 

1 

1 

3 

G.  W.  Hunter 

C> 

8 

9 

10 

n 

7 

46^ 

33  Vs 

15 

40 

1 

1 

1 

1 

1 

Thos.  Cook 

10 

8 

9 

8 

7 

6 

8 

66  y2 

35 

23 

28 

1 

3 

1 

3 

B.  H.  Hill 

9 

8 

8 

to 

7 

6 

8 

66 

35 

23 

10 

1 

3 

1 

A.  C.  Porter 

8 

8 

8 

8 

S 

8 

8 

64 

35 

22 

40 

1 

2 

1 

1 

1 

W.  S.  Hull 

10 

8 

10 

7 

6 

8 

8 

68 

35 

23 

80 

1 

3 

1 

1 

1 

203 

91 

6 

4 

3 

24 

4 

7 

8 

5 

11 

236  PAY  ROLLS 

may  be,  the  total  amount  is  debited  to  the  Expense  account  or  to  the  Salary  account  if  there  is  one,  more 
often  to  Pay  Roll  account,  Cash  being  credited.  Many  forms  and  devices  are  used  for  keeping  accounts  with  em- 
ployees. 

In  some  factories  a  timekeeper  is  employed  for  each  department.  It  is  his  duty  to  make  up  the  time  for  each 
employee  in  his  department,  and  to  turn  over  the  record  to  the  Bookkeeping  department. 

In  most  factories  each  employee  keeps  his  own  time  by  means  of  a  Time  Register  Clock  and  the  Time  or  Job 
Tickets.  The  Job  or  Time  Tickets  are  ruled  for  each  employee  to  record  the  time  he  puts  in  on  each  job  or  on  each 
kind  of  work  he  is  occupied  with.  These  Time  or  Job  Tickets  are  turned  in  by  each  employee  to  the  foreman  of 
each  department,  who  turns  them  over  to  the  cost  clerk.  The  cost  clerk,  or  a  clerk  in  the  bookkeeping  department, 
compares  the  total  time  on  the  time  or  job  tickets  with  the  employee's  time  in  the  time  register  clock,  The  cost 
clerk,  after  he  apportions  the  cost  of  the  several  jobs  to  the  several  departments,  turns  the  time  or  job  tickets  over 
to  the  bookkeeping  department,  where  the  time  and  wages  of  each  employee  are  entered  on  the  Time  Sheet,  or  Time 
Account,  more  commonly  called  the  Pay  Roll  Book. 

The  Pay  Roll  Book  is  made  up  in  various  forms.  Some  factories  combine  the  time  book  and  the  scheme  for 
determining  the  number  of  the  different  denominations  of  money  to  make  the  required  change.  (See  the  second 
illustration.)  Others  show  only  the  time  book  form  in  the  Pay  Roll  Book,  and  have  the  scheme  for  determining  the 
number  of  each  denomination  to  make  the  change  printed  on  separate  sheets. 

This  pay  roll  is  made  up  on  the  scale  of  an  eight-hour  day.  A  time  and  a  half  is  reckoned  for  time  over  eight 
hours  a  day.  Double  time  is  allowed  for  Sunday  or  Legal  Holiday  work.  The  student  is  requested  to  verify  this 
pay  roll. 

If  allowances  are  made  to  employees  between  pay  days,  a  column  should  be  ruled  in  the  pay  roll  to  record  such 
allowances,  and  the  allowances  would  have  to  be  deducted  before  the  check  is  drawn  for  the  amount  of  the  pay  roll. 
Most  factories  will  not  make  allowances  to  employees. 

After  the  Time  account  is  made  up  and  recorded  in  the  pay  roll  book  the  bookkeeper  determines  the  number 
of  each  denomination  required  to  make  the  exact  change  for  each  employee,  as  follows: 

He  looks  down  the  columns  of  amounts  and  sets  down  in  the  scheme  for  denominations  of  money  to  make 
change  (see  scheme  of  money  denominations  from  $20  to  lc.)  first,  the  number  of  2U's;  next,  the  number  of  10's; 
and  so  on  down  to  l's,  or  pennies.  To  exemplify:  John  Smith's  salary  is  $34. C9.  It  will  require  1  twenty,  1  ten, 
4  one's,  1  half  dollar,  1  ten  cent  piece,  1  five  cent  piece,  and  4  pennies,  to  pay  him.  In  like  manner  he  sets  down 
the  denominations  required  for  each  employee.  Next,  he  totals  the  different  denominations  required;  as,  GX  $20— 
$120;  4X$10=$40;  3X$5  =  $15;  24X$1=$24;  4X50c.=$2.00;  7X25c.=r$1.75;  8X10c.=80c.;  5X5c.=25c; 
and  llXlc.=llc.  Now,  $120+$40+$15+$244-$2+$1.75+80c.+25c.+llc.=$203.91,  which  is  the  total 
amount  required  to  meet  the  pay  roll.     This  proves  the  number  of  denominations. 

The  bookkeeper  next  draws  a  check  foi  $203.91,  and  debits  Pay  Roll  and  credits  Cash.  He  then  goes  to 
the  bank  and  gets  the  number  of  different  denominations  as  shown  by  the  scheme  for  denominations.  He  then 
writes  up  his  pay  roll  envelopes  with  the  number  or, name  of  each  employee,  and  the  amount,  and  fills  each  envelope 
with  the  required  amount.  If  there  should  be  money  left  after  the  last  envelope  was  filled,  or  not  enough  to  fill 
the  last  envelope,  a  mistake  has  been  made,  which  must  be  found  and  corrected.  If  there  is  no  money  left  when 
the  last  envelope  is  filled,  the  bookkeeper  has  only  presumptive  proof  that  his  work  was  correct.  He  has  not  posi- 
tive proof,  because  he  might  have  left  $5  out  of  James  Farley's.envelope  and  put  $5  too  much  in  Sam  Daley's  en- 
velope. But  whatever  other  faults  workmen  may  have,  most  of  them  are  honest,  and  such  a  mistake  would  prob- 
ably be  reported  and  corrected  by  the  workmen  themselves. 

To  prevent  mistakes  at  least  two  persons  count  the  money  and  prove  the  work  before  the  pay  envelopes  are 
sealed.     In  most  large  factories  three  persons  verify  the  work  before  the  pay  envelopes  are  sealed. 

Some  bookkeepers  first  set  out  all  the  20's  required;  next,  all  the  10's;  next,  all  the  5's;  and  so  on  with 
each  different  denomination.      Banks  often  furnish  blanks  for   Change  List.      See  page  210. 

Most  bookkeepers  use  Money  Racks  for  filling  the  envelopes.  Some  count  the  money  by  hand.  Very  few 
ever  try  to  use  paper  bills  as  they  are  too  liable  to  stick  together  and  cause  mistake. 

However,  some  employers  prefer  to  pay  by  check.  They  use  a  form  of  check  that  is  good  only  against  the 
Pay  Roll  account.  They  contend  that  the  name  and  the  amount  can  be  written  on  the  check  as  quickly  as  on 
the  pay  envelope.  The  bookkeeper  fills  in  the  name  and  amount  on  the  check  Then  the  use  of  checks  obviates 
the  necessity  of  making  out  the  number  of  denominations  required,  and  also  the  liability  of  error  in  filling  the  pay 
envelope. 

The  larger  factories,  if  they  pay  weekly,  rule  the  Pay  Roll  Book  with  sufficient  columns  to  provide  for  from  nine 
to  twelve  weeks.     This  obviates  the  necessity  Of  writing  the  names  so  often. 

After  the  pay  envelopes  are  made  up  and  sealed,  the  envelopes  for  each  department  are  sent  to  the  respective 
foremen,  who  line  up  their  employees  in  the  order  of  the  numbers  on  the  pay  envelopes,  and  each  foreman  hands 
out  the  pay  envelopes  as  the  workmen  file  by  him. 

Some  factories  require  each  employee  to  sign  a  Receipt  Card,  which  has  blanks  to  be  filled  to  show  the  num- 
ber of  the  employee,  amount,  date,  name  of  factory,  town,  and  name  of  employee.  On  the  receipt  card  is  printed 
the  following  or  similar  instruction:  "Sign  this  Receipt  and  Return  to  the  Office  Promptly,. or  Money  Will  be  With- 
held Next  Pay." 

Other  factories  do  not  require  any  receipt  from  their  employees. 

Business  men  make  loud  complaint  of  their  inability  to  get  competent  help  on  the  pay  roll.  For  this  reason 
much  space  has  been  given  to  this  subject.  Teachers  should  dwell  on  this  subject  until  the  principles  and  the  forms 
are  thoroughly  understood.  Teachers  may  dictate  names  or  numbers  Of  employees,  rate  by  the  hour,  number  of 
hours,  with  allowances  for  over-time  and  for  Sunday  or  Legal  Holiday  work,  and  require  each  member  of  the 
class  to  bring  a  completed  pay  roll  to  the  recitation. 


COST   ACCOUNTING  237 

Contractors,  builders,  etc.,  frequently  have  long-folding  time  cards  made  on  the  plan  of  a  railway  time-table, 
which  are  arranged  especially  for  their  work,  having  separate  columns,  showing  just  how  much  time  has  been  put 
in  on  the  various  jobs  or  lines  of  work.  By  this  arrangement,  they  can  tell  just  how  much  time  has  been  required, 
and  what  it  has  cost  to  do  certain  pieces  of  work,  even  though  the  work  has  been  done  at  various  times  or  at  odd 
hours. 


CHAPTER  X.— Cost  Accounting 

There  are  three  things  to  consider  in  determining  the  cost  of  any  manufactured  product.  They  are,  first, 
the  labor,  second,  the  raw  material,  third,  the  fixed  charges. 

The  subject  of  cost  accounting  is  one  that  cannot  be  treated  exhaustively  in  a  text  of  this  character.  Owing 
to  conditions  peculiar  to  each  of  the  great  variety  of  manufacturing  concerns  only  a  few  general  principles  can  be 
given.  An  explanation  of  the  cost  system  of  one  manufacturer  will  illustrate  these  principles  better  than  to  give 
a  number  of  general  rules. 

A  manufacturing  concern,  such  as  a  machine  shop,  job  printing  establishment,  food  factory,  sash  and  door 
mill,  or  others  of  similar  character  engaged  in  the  manufacture  of  goods  upon  order  of  the  customers,  is  usually 
divided  into  several  departments,  each  of  which  is  in  direct  charge  of  a  foreman.  When  an  order  for  goods  is  re- 
ceived it  is  passed  upon  by  the  Credit  Department  which  determines  whether  or  not  the  customer  is  worthy  of  credit 
and  will  pay  for  the  goods  as  agreed  upon  when  they  are  completed  and  delivered  to  him.  The  order  then  goes  to 
tbe  order  clerk  who  enters  it  in  a  book  called  a  Job  Record,  giving  the  order  a  number.  If  a  price  for  the  work 
has  been  agreed  upon  this  is  also  noted  in  the  job  record,  together  with  such  other  data  as  may  be  necessary.  The 
job  record  is  ruled  into  columns  for  each  department,  and  consists  of  loose-leaf  sheets  bound  in  a  loose-leaf  binder. 
Instruction  tickets  for  each  department  are  prepared  by  the  order  clerk,  containing  detailed  specifications  for  the 
guidance  of  each  foreman.  The  order  is  then  given  out  to  the  foreman  of  the  department  where  the  work  will  start, 
and  passes  from  one  department  to  another  in  regular  order  until  completed.  Each  of  the  workmen  in  the  several 
departments  is  given  by  his  foreman  a  Daily  Time  Ticket  in  which  he  records  date,  number  of  order  or  orders,  his 
own  name,  hours  spent,  and  such  other  facts  as  may  be  desired.  At  the  close  of  each  day  these  time  tickets  are 
handed  to  the  foreman  of  the  department  who  O.  K.'s  them,  if  correct,  and  sends  them  to  the  cost  clerk. 

The  cost  clerk,  who  in  the  meantime  has  received  from  the  order  clerk  the  loose-leaf  sheets  of  the  Job  Record, 
proceeds  to  complete  the  time  tickets  by  entering  the  rate  of  wages  of  the  workmen  and  carrying  out  the  extensions. 
The  time  ticket  of  a  workman  may  show  several  orders  to  which  he  has  devoted  his  time  in  one  day.  The  totals 
of  these  time  tickets  are  transferred  to  the  several  job  record  sheets  and  the  amounts  are  placed  in  the  columns  repre- 
senting the  departments  doing  the  work.  Each  department  proceeds  in  a  like  manner,  no  matter  how  many  of  them 
there  may  be. 

An  Instruction  Ticket  is  also  given  by  the  order  clerk  to  the  foreman  of  the  stock  room  who  delivers  to  the 
several  departments  the  material  called  for  by  his  ticket.  The  stock  man  returns  to  the  cost  clerk  an  accurate 
account  of  the  kind,  quality,  weight,  size,  and  quantity  of  stock  so  delivered.  The  cost  clerk  enters  these  stock 
items  in  the  job  record  against  the  proper  account,  and  later  makes  another  entry  of  the  stock  in  a  Merchandise 
Stock  Record.  At  the  time  of  entering  the  order,  the  shipping  clerk  has  received  a  similar  ticket  wherein  he  is 
instructed  as  to  when,  how,  and  to  whom  the  goods  are  to  be  delivered  or  shipped. 

The  order  having  been  completed  by  all  departments  is  delivered  to  the  shipping  clerk  who,  following  his  in- 
structions, ships  or  delivers  the  finished  product.  When  the  work  of  all  departments  is  completed,  each  foreman 
returns  his  instruction  ticket  to  the  cost  clerk.  When  these  instruction  tickets  from  the  several  departments  are  in 
the  possession  of  the  cost  clerk  and  have  all  been  properly  entered  in  the  job  record,  he  incloses  them  in  a  large, 
strong  envelope,  on  the  outside  of  which  is  a  recapitulation  of  the  totals  of  the  cost  in  the  several  departments,  the 
price  at  which  the  goods  are  to  be  billed,  terms  of  payment,  and  other  necessary  information.  This  envelope  is 
called  the  Charge  Ticket  and  when  completed  as  above  outlined  is  sent  to  the  billing  clerk.  The  billing  clerk  makes 
out  the  invoice  or  bill  for  the  goods  and  delivers-  the  charge  ticket  together  with  a  carbon  duplicate  of  the  invoice 
to  the  bookkeeper. 

The  bookkeeper  apportions  the  profit  to  each  department  and  gives  each  department  credit  on  his  books  for 
its  proper  share  of  profit.  When  the  cost  clerk  has  completed  his  entries  from  the  time  tickets  he  sends  them  to  the 
bookkeeping  department,  where  they  are  recorded  in  a  pay  roll  book  for  the  purpose  of  determining  the  pay  to 
which  each  employee  is  entitled.  A  workman's  time  clock  is  generally  used  to  record  the  arrival  and  departure  of 
the  employees.  The  record  shown  on  the  workman's  time  tickets  must  agree  with  that  registered  by  the  time 
clock,  thus  furnishing  a  check  on  the  time  of  each  workman.  These  time  tickets,  as  returned  by  each  foreman,  in 
connection  with  the  time  clock,  furnish  the  necessary  data  for  making  up  the  pay  roll.  The  subject  of  pay  rolls  is 
more  fully  treated  elsewhere  in  this  text. 

The  system  above  outlined  may  be  adapted  to  a  large  number  of  different  kinds  of  manufacturing  concerns. 
If  accurately  kept,  the  raw  cost  of  manufactured  goods  may  easily  be  determined.  To  this  cost  must  be  added  what 
is  known  as  Fixed  Charges,  which  includes  such  items  as  power,  heat,  light,  rent,  taxes,  insurance,  depreciation  of 
machinery,  management,  clerk  hire,  and  other  expenses  of  a  fixed  character,  which  cannot  be  charged  directly 
against  any  single  order,  but  must  be  apportioned  to  the  business  for  the  year.  The  fixed  charges  are  generally 
applied  to  each  individual  order  on  a  percentage  basis.  By  ascertaining  the  total  amount  of  business  done  by  the 
concern  for  a  given  period,  and  the  total  fixed  charges  for  the  same  period,  the  percentage  of  fixed  charges  which 
should  be  added  to  the  cost  of  production  may  be  accurately  determined. 


CHAPTER  XI— How  to  Find  Errors  In  Trial  Balance 

If  Trial  Balance  is  off,  do  not  "force"  it  or  "plug"  it,  but  proceed  as  follows: 

1.  Find  the  exact  difference. 

2.  If  the  difference  is  la,  10c,  or  $1.00,  or  any  number  of  l's,  or  the  difference  is  $99.90  or  $99.99,  etc.,  the 
error  is  most  likely  to  be  in  addition  or  subtraction.  Prove  your  work  by  the  unitate,  the  9,  the  11,  or  the  13, 
method. 

3.  Compare  the  difference  with  the  accounts  in  the  last  balance  of  balances  account.  Compare  the  total 
footings  of  your  posting  mediums  with  the  total  of  your  Trial  Balance,  less  old  balances. 

4.  If  there  are  more  than  two  significant  figures  in  the  difference  as  $11.88,  $43.56,  $62.37,  $143.55,  $1480.05, 
etc.,  and  the  difference  is  divisible  by  9,  a  transplacement  (or  slide)  maybe  suspected.  Then  divide  the  difference 
by  9,  and  that  quotient  by  11,  and  then  look  in  posting  mediums  for  the  last  quotient  in  dollars  posted  as  cents  or 
two  places  posted  in  cents'  column  or  vice  versa.  Suppose  the  difference  is  $11.88;  1188  divided  by  9  gives  132, 
and  132  divided  by  11  gives  12,  or  $12.00,  which  is  the  number  transplaced,  or  posted  as  cents.  $1480.05  divided 
by  9  gives  16445,  and  16445  divided  by  11  gives  1495,  or  $1495;  and  the  whole  number  has  been  moved  to  the 
right  two  places,  and  posted  as  $14.95,  and  so  forth.  (Note. — If  the  unitate  of  the  difference  is  9,  the  difference 
itself  is  divisible  by  9,  and  this  can  be  determined  by  inspection.) 

5.  If  there  are  only  two  significant  figures  in  the  difference,  and  the  unitate  of  these  figures  is  9,  a  transposi- 
tion may  be  suspected.  Suppose  the  difference  is  $27,000;  disregard  the  ciphers  and  divide  the  significant  figures 
by  9.  27  divided  by  9  gives  3,  and  this  shows  that  some  number  has  been  transposed  whose  fifth  figure  is  three 
greater  than  its  fourth  figure;  as  $58295  posted  as  $85295  or  vice  versa.  Then  look  in  the  posting  mediums  for 
numbers  that  answer  this  condition,  and  trace  each  one  to  the  Ledger  until  the  transposed  figure  is  found. 

Note. — By  applying  the  principles  elucidated  in  No.  4  and  No.  5,  it  will  be  very  easy  to  find  the  numbers 
that  may  be  transposed  to  give  any  given  difference  that  may  occur  in  a  trial  balance  by  reason  of  a  transposition. 
To  exemplify:  Suppose  the  trial  balance  shows  us  18  cents  long,  on  the  credit  side.  18  divided  by  9  gives  2;  and 
2  plus  11  gives  13,  and  13  transposed  gives  31,  and  the  difference  between  13  and  31  is  18;  which  shows  that  13 
may  have  been  posted  as  31,  because  this  would  make  us  just  18  cents  long  on  the  credit  side.  To  find  the 
numbers  that  could  have  been  transposed  to  give  a  difference  of  18  cents,  we  have  only  to  add  11  consecutively  to 
2,  the  quotient  of  18  divided  by  9,  and  again  add  11  to  their  sum,  13,  (2  plus  11)  and  so  on,  until  we  reach  a 
number  that  is  divisible  by  10.  Thus,  18  divided  by  9  gives  2,  and  11  added  to  2  gives  13;  13  transposed  gives 
31.  Eleven  added  to  13  gives  24,  and  24  transposed  is  42;  and  11  added  to  24  gives  35,  and  35  transposed  gives 
53;  and  following  this  principle  we  have  the  numbers,  13,  24,  35,  46,  57,  68,  and  79,  as  the  numbers  that  may 
be  transposed  to  give  a  difference  of  18  cents.  If  we  add  11  to  79  we  have  90,  but  90  is  divisible  by  10;  and 
we  are,  therefore,  at  the  end  of  our  series  of  numbers  that  may  be  transposed  to  give  a  difference  of  18  cents  when 
we  come  to  79.  In  this  illustration  we  have  taken  the  column  of  cents  and  dimes  as  the  period  of  two  figures  to 
be  considered.  If  the  difference  should  be  $1.80  or  $180.00  or  $1800.00,  and  so  on,  we  disregard  the  ciphers  (except 
that  they  show  us  where  the  transposition  occurred)  and  proceed  in  the  same  way  as  in  the  illustration  to  find 
the  numbers  that  may  have  been  transposed  to  give  us  the  difference  required. 

The  same  principles  apply  in  transpositions  in  the  first  and  third  positions,  or  first  and  fourth,  or  any  other 
position,  or  second  and  fourth  and  any  other  position,  etc. ;  except  that  we  Use  the  99  and  the  999  method,  and 
101  and  1001  method,  etc.,  in  finding  the  number  transposed,  and  the  numbers  that  may  be  transposed  to  give  the 
exact  difference  that  the  trial  balance  may  be  off.  To  exemplify:  Suppose  we  are  $1.98  long  on  the  credit  side. 
Now,  198  divided  by  99  gives  2.  Then  101  added  to  2  gives  103,  and  103  transposed  gives  us  301;  and  the  differ- 
ence between  301  and  103  is  198,  or  $1.98.  Then  to  find  the  other  numbers  that  may  be  transposed  to  give  $1.98, 
we  add  101  to  2  and  we  get  103;  then  to  103  we  add  101,  and  so  on.  and  we  have  as  the  numbers  that  may  be 
transposed  to  give  a  difference  of  $1.98—103,  204,  305,  406,  507,  608,  and  709.  If  we  add  101  to  709  we  get  810; 
but  810  is  divisible  by  10,  and,  therefore,  709  is  the  last  number  of  the  series. 

Double  Transpositions. — The  difference  produced  in  the  trial  balance  by  a  double  transposition  is  not 
necessarily  divisible  by  99  or  999,  as  it  is  not  produced  on  that  mathematical  principle.  It  may  so  happen  that  the 
difference  may  be  divisible  by  99  or  999,  but  it  is  accidental  and  not  mathematical.  But  the  unitate  of  the  differ- 
ence produced  by  a  double  transposition  is  9,  and  disregarding  terminal  ciphers  the  difference  is  divisible  by  9 ;  and 
therefore  a  transposition  may  be  suspected. 

If  the  difference  in  the  trial  balance  by  a  double  transposition  should  be  divisible  by  99  or  999,  the  number 
transposed  could  not  be  found  by  the  principle  of  99  or  999,  because  the  difference  was  not  produced  by  that  prin- 
ciple; but  the  number  transposed  to  give  the  difference  can  easily  be  selected  by  inspection  by  applying  the  mathe- 
matical principle  that  the  difference  in  dollars  in  the  trial  balance  is  one  less  than  the  difference  between  the  dollars 
and  the  cents  in  the  number  transposed. 

If  the  difference  is  expressed  in  four  figures  and  the  unitate  of  the  difference  is  9,  and  the  difference  is  not 
divisible  by  999,  then  it  is  believed  that  the  numbers  that  would  give  the  difference  in  the  trial  balance  may  be  ' 
easily  selected  by  inspection.  To  exemplify:  Suppose  $65.14  has  been  posted  as  14.65.  This  would  give  a  differ- 
ence in  the  trial  balance  of  $50.49.  Now  5049  is  not  divisible  by  999,  but  the  unitate  of  5049  is  9;  and  therefore 
a  transposition  may  be  suspected.  Suppose  the  credit  side  is  $50.49  long.  Then  the  smaller  period  of  two  figures 
in  the  cent  column  has  been  transposed  into  the  dollar  column;  and  the  larger  period  of  two  figures  in  the  dollar 
column  has  been  transposed  into  the  cent  column.  In  such  transpositions  the  difference  in  dollais  in  the  trial  bal- 
ance will  be  one  less  than  the  difference  between  the  dollars  and  the  cents  of  the  number  transposed,  or  in  this  case, 
51.  65  less  14  is  51.  Then  since  the  credit  side  was  long,  we  look  on  the  credit  side  of  our  posting  mediums 
for  a  number  of  dollars  and  cents  in  which  the  cents  subtracted  from  the  dollars  will  give  51,  and  trace  such  numbers 
to  the  Ledger,  until  we  find  the  number  transposed. 

Again  suppose  the  difference  is  $65.34.  6534  is  not  divisible  by  999,  but  the  unitate  of  6534  is  9,  and  there- 
fore a  transposition  may  be  suspected.  Suppose  the  debit  side  is  $65.34  long,  then  we  look  on  the  debit  side  of 
our  posting  mediums  for  a  number  of  dollars  and  cents,  the  difference  between  whose  dollars  and  cents  will  be  one 
greater  than  the  difference  in  dollars  in  the  trial  balance.     $80.14  answers  this  condition.     14  subtracted  from 

[238] 


HOW  TO  FIND  ERRORS  IN  TRIAL  BALANCE  239 

80  leaves  66,  which  is  one  greater  than  the  difference  in  dollars  in  the  trial  balance.  Trace  numbers  that 
answer  this  condition  to  the  Ledger  till  the  transposed  number  is  found. 

The  student  should  understand  the  mathematics  underlying  bookkeeping  well  enough  to  enable  him  to  deter- 
mine in  most  cases  what  was  done  to  produce  the  difference  in  the  trial  balance  by  what  the  difference  is.  In  other 
words,  he  should  read  his  process  to  find  the  error  out  of  what  the  difference  itself  expresses  to  him.  To  exemplify : 
Suppose  the  difference  is  $79.20.  He  should  know  the  mathematical  principle  that  when  the  difference  is  in  four 
places  and  the  cents  added  to  the  dollars  gives  99,  the  error  was  most  likely  produced  by  a  transplacement ;  and 
the  number  necessary  to  make  the  difference  up  to  even  dollars  was  transplaced  to  the  cent  column;  that  is,  $80.00 
was  posted  as  $.80. 

Again,  if  the  difference  is  $72.00  he  should  be  able  to  read  at  a  glance  that  $91.00  has  been  posted  as  $19.00 
or  vice  versa,  as  $91.00  is  the  only  number  of  dollars  that  can  be  transposed  to  give  a  difference  of  $72.00. 

Or,  again,  if  the  difference  is  $36.00,  he  should  be  able  to  read  at  a  glance  that  $15,  $26,  $37,  $4S,  or 
$59,  are  the  only  number  of  dollars  of  the  series  that  could  be  tiansposed  to  give  a  difference  of  $36.  If  he  under- 
stands the  mathematics  of  the  science,  it  is  only  a  question  of  a  very  few  minutes  to  find  an  error  produced  by  a 
transplacement  or  a  transposition. 

6.  If  the  difference  is  not  divisible  by  9,  divide  by  2  and  look  for  the  quotient  posted  twice  to  the  same  side. 

7.  Look  carefully  over  the  folio  numbers  of  all  posting  mediums  to  see  whether  any  posting  has  been  omitted; 
or  accounts  not  to  be  posted  set  in  posted  columns  or  vice  versa. 

8.  See  whether  Balance  of  Cash  account  has  not  been  omitted. 

9.  Look  for  some  account  ruled  off  during  the  month  to  find  the  balance  and  the  balance  not  brought  down 
10.  Localize  the  error  by 

First — Checking  all  footings  carried  forward  in  the  several  books  or  in  the  recapitulation  sheets,  etc. 

Second — Drawing  off  from  the  Ledger  the  credit  postings  from  the  Sales  Book,  using  a  separate  column  of 
figures  for  each  week's  posting.  Find  the  grand  total  for  weeks  and  compare  with  total  of  Ledger  for  same  period. 
Compare  total  by  weeks.     If  difference  is  found  there  is  only  one  week  to  check. 

Third — Compare  Purchase  Book  posting  in  the  same  way. 

Fourth — As  the  Cash  Book  and  the  Journal  are  self-balancing,  they  are  left  to  be  compared  last.     By  pro- 
ceeding in  this  systematic  and  sectionalized  manner,  checking  is  reduced  to  a  minimum  and  great  time  saved, 
(Note — It  is  better  to  use  a  different  colored  pencil  in  checking  postings  from  different  posting  mediums.) 

11.  Both  sides  of  the  Trial  Balance  may  be  off. 

The  learner  must  not  overlook  the  principle  that  the  true  trial  balance  is  the  total  footing  of  the  posting  me- 
diums for  the  period  covered  by  the  trial  balance.  If  to  this  sum  we  add  the  balances  brought  down  under  old 
accounts,  we  have  the  sum  of  the  trial  balance  sought.  If  both  sides  should  be  off,  then  find  the  exact  difference 
the  debit  side  is  off  by  taking  the  difference  between  the  total  debit  footings  of  posting  mediums  and  the  true  trial 
balance,  as  defined  above.  This  test  will  determine  whether  the  error  has  been  made  by  failing  to  bring  down 
old  balances  or  by  wrong  posting.  Then,  having  the  exact  difference  the  debit  side  is  off,  apply  the  tests  as  enum- 
erated above. 

If  both  sides  are  off,  the  exact  amount  the  credit  side  is  off  may  be  found  by  taking  the  difference  between 
the  total  debit  footings  of  posting  mediums  and  the  true  trial  balance.  Then,  having  the  exact  difference  the  credit 
side  is  off,  apply  the  tests  enumerated  above. 

Each  student  should  exhaust  these  suggestions  thoroughly  before  he  allows  any  one  to  help  him. 

12.  If  the  error  cannot  be  found,  after  all  due  diligence,  then  open  a  Discrepancy  account  and  debit  or  credit 
the  account  that  is  off,  as  the  case  may  require,  with  discrepancy,  in  red  ink,  for  the  amount  of  the  error. 

If  the  error  is  not  found  in  a  reasonable  time,  close  the  Discrepancy  account  into  the  Loss  and  Gain  account. 
Make  no  attempt  at  concealment,  but  consult  your  teacher  or  your  employer  freely  about  the  error. 
It  is  important  that  you  consult  with  your  teacher  or  your  employer  about  all  your  work. 

How  to  Prevent  Errors. — The  prevention  of  error  Is  of  such  great  importance  that  many  business  houses 
will  go  to  great  expense  to  provide  their  bookkeeper  with  a  safeguard. 

Many  business  houses  have  been  known  to  pay  $50.00  to  $500.00  for  a  scheme  to  safeguard  their  book- 
keeper against  error. 

1.  The  11  check  figure  method  and  the  13  check  figure  method,  explained  in  this  book,  have  been  sold  in 
many  parts  of  the  country  for  $50.00  each,  and  often  for  much  more.  To  apply  these  methods  the  books  of 
original  entry  and  the  Ledger  are  ruled  with  a  column  for  check  figures,  and  after  each  entry  is  made,  the  check 
figure  of  the  amount  by  the  11  or  by  the  13  method  is  set  in  the  check  figure  column.  Then  after  the  amount 
is  posted  to  the  Ledger,  the  check  figure  is  again  struck  out  of  the  amount  and  the  check  figure  set  in  the  check 
figure  column  in  the  Ledger. 

These  check  figures  must  agree,  and  therefore  an  error  in  posting  is  prevented. 

The  advantages  of  these  methods  have  been  explained  and  the  student  is  referred  to  the  explanation,  and 
advised  to  practise  these  methods  until  he  can  handle  them  with  facility;  because  he  may  be  required  to  use  either 
in  the  position  he  may  be  called  on  to  fill.  Not  to  know  how  to  use  them  would,  in  many  instances,  lose  him  the 
position. 

2.  Other  business  houses  require  the  bookkeeper  to  use  the  Reverse  Posting  Proof.  This  is  done  by  provid- 
ing the  bookkeeper  with  slips  of  paper  about  one  inch  wide,  and  of  convenient  length  for  the  books  used.  Two 
colors  of  paper  are  used.  The  white  slips  are  used  for  the  debit  postings  and  the  pink  for  the  credit  postings.  When 
a  debit  amount  is  posted  the  amount  is  written  on  a  white  slip  and  the  slip  allowed  to  protrude  above  the  Ledger 
at  the  page  of  the  account,  far  enough  for  the  amount  to  be  seen.  Then,  when  all  the  debit  amounts  of  any 
posting  medium  have  been  posted  the  total  of  the  amounts  on  the  white  slip  should  equal  the  total  debit  post- 


240 


HOW  TO  FIND  ERRORS  IN  TRIAL  BALANCE 


ings  for  that  medium.  The  amounts  on  these  slips  are  generally  transferred  to  a  sheet  of  paper  or  a  small  book, 
properly  ruled  for  the  purpose. 

The  credit  postings  are  duplicated  in  the  same  way  on  the  pink  slips. 

This,  it  will  be  seen,  is  double  posting;  and  as  the  totals  of  the  slips  and  of  the  amounts  in  the  Ledger  must 
agree  it  is  a  check  against  an  error. 

3.  Other  business  houses  require  their  bookkeepers  to  provide  themselves  with  a  small  book  with  double  money 
columns  on  each  page.  Then,  when  the  bookkeeper  posts  from  each  medium,  he  first  writes  the  initial  or  initials 
of  the  books  he  posts  from  at  the  top  of  the  column  in  the  little  book;  as  C.  B.  for  Cash  Book,  and  the  date.  Then 
when  he  posts  a  debit  amount  to  the  debit  side  of  the  Ledger,  he  writes  the  amount  in  the  debit  column  of  the 
little  book.  When  he  posts  a  credit  amount  to  the  credit  side  of  the  Ledger,  he  writes  the  amount  in  the  credit 
column  of  the  little  book. 

From  this  it  will  be  seen  that  the  debit  and  the  credit  amounts  in  the  little  book  must  equal  the  debit 
and  the  credit  amounts  respectively,  in  the  Ledger. 

This,  it  will  be  seen,  is  double  posting  and  is  a  check  against  an  error. 

This  safeguard  is  sometimes  called  the  Perpetual  Ledger  Proof  Posting,  and  the  little  book  is  generally  spoken 
of  as  the  Perpetual  Ledger  Balance  Proof  Book. 

4.  Other  business  houses  have  their  Ledgers  made  self-balancing  by  having  a  ruling  that  provides  for  a  debit 
and  a  credit  balance  in  the  Ledger.  These  balances  are  written  in  the  balance  column  as  the  posting  is  done.  This 
enables  a  balance  of  the  difference  to  be  taken  daily,  if  desired.  Balance  of  any  account  may  be  had  instantly. 
Monthly  statements  are  readily  made  out  by  use  of  this  Ledger.  See  Self-balancing  Ledgers  under  Classi- 
fication of  Ledgers,  pages  227,  228.  i 

SELF-BALANCING  LEDQER 


Date 


L  F 


EXPLANATION 


Debit 


Credit         Debit  Bal.     Credit  Bal 


5.  Other  business  houses  have  their  books  ruled  so  as  to  apply  one  of  the  three  leading  columnar  safeguard 
methods  or  some  modification  of  these  methods. 

These  mathematical  tests  are  known  among  accountants  as  (1)  the  "Bankers'  Tests,"  First,  the  "Difference 
Test,"  and  Second,  the  "Footings  Test."  The  "Difference  Test"  proves  the  correctness  of  the  work  by  the  mathe- 
matical principle  that  the  difference  between  the  columns  of  the  sums  of  the  old  balance  and  of  the  deposits,  less 
the  column  of  checks,  equals  the  last  balance;  Second,  The  "Footings  Test"  by  which  the  correctness  of  the  work 
is  proved  by  adding  the  footings  of  the  checks  columns  and  the  footings  of  the  Currency  deposits  together.  These 
footings  must  equal  the  footing  of  the  Deposit  column.  And  (2)  the  "Total  Tests,"  that  the  totals  of  several  col- 
umns of  items  must  equal  the  grand  total  of  all  such  columns;  (3)  the  "Difference  Test,"  the  ruling  of  columns 
so  as  to  provide  for  the  mathematical  test  that  the  difference  between  the  columns  representing  receipts,  and  the 
columns  representing  disbursements,  equals  the  difference  between  the  columns  representing  losses  and  the  columns 
representing  gains. 

This  test  or  some  modification  of  it  is  nearly  always  applied  to  the  synoptical  journal  or  other  columnar  journals. 

6.  Other  business  houses  require  their  bookkeeper  to  take  off  the  footing  oh  the  adding  machine,  using  the 
black  for  the  debits  and  the  red  for  the  credits.  This  is  required  to  be  done  daily,  so  if  an  error  occurs  only  one 
day's  work  is  to  be  considered. 


CHAPTER  XII.— Miscellany 

Cash  Sales. — In  the  absence  of  a  regular  cash  system,  which  is  not  generally  used  in  the  smaller  retail  houses, 
a  certain  amount  of  change  is  placed  in  the  various  money  drawers  each  morning.  All  cash  sales  of  the  day  are 
thrown  in  with  this  sum  and  at  night  the  cash  from  these  various  money  drawers  is  counted,  and  from  it  the  amount 
deposited  for  change  in  the  morning  is  subtracted,  and  the  balance  entered  in  one  amount  on  the  debit  side  of  the 
Cash  Book  as  "Mdse  Sales."  When  this  system  is  used,  nothing  but  cash  sales  are  paid  over  the  counter,  and  all 
accounts,  notes,  drafts,  etc.,  are  paid  at  the  bookkeeper's  desk. 

If  there  are  various  departments  in  the  store,  and  it  is  desired  to  keep  a  separate  record  of  the  sales,  then 
each  department  should  be  debited  for  the  change  furnished  in  the  morning,  and  credited  for  the  sum  returned.  A 
record  of  the  amount  of  change  deposited  is  usually  kept  in  a  common  five  or  ten  cent  memorandum  book.     Some 


MISCELLANY  241 

bookkeepers  also  enter  in  this  book  the  actual  amount  of  cash  on  hand  each  night.     This  sometimes  proves  of  great 
assistance  to  them  on  the  following  day  in  getting  their  cash  balance. 

The  cash  sales  are  never  itemized  in  a  retail  store,  and  seldom  ever  in  a  wholesale  house;  however,  it  is  some- 
times done  for  the  purpose  of  being  able  to  fill  country  orders  when  customers  write  and  request  them  to  duplicate 
their  last  order,  or  some  other  order  of  a  certain  date.  Again,  merchants  soon  become  acquainted  with  this  class 
of  customers  and  itemize  each  order,  while  other  merchants  itemize  only  such  cash  sales  as  are  given  verbally, 
depending  on  their  order  book  or  the  customer's  letter  for  all  other  orders. 

Fuel. — When  it  is  desired  to  classify  the  various  items  of  expense,  an  account  may  be  kept  with  Fuel,  charg-. 
ing  it  with  everything  in  the  way  of  wood,  coal,  and  kindling.  When  coal  oil  is  used  for  lighting  purposes,  it  may 
be  kept  in  connection  with  Fuel  account  by  opening  an  account  with  Fuel  and  Oil. 

Signature. — When  a  person  engages  in  business,  he  should  establish  a  signature  and  be  very  particular  to 
use  it  at  all  times,  especially  in  signing  notes,  drafts,  and  other  commercial  papers;  also  in  cases  where  his  signa- 
ture is  required  for  the  purpose  of  identifying  the  signatures  of  other  people. 

Taxes. — There  are  various  minor  reasons  for  keeping  an  account  with  taxes,  but  it  is  generally  done  when  it 
is  desired  to  classify  the  expense.  It  is  also  much  more  convenient  for  reference  purposes,  and  may  be  somewhat 
gratifying  in  this  respect.     In  the  absence  of  this  account,  the  taxes  should  be  charged  to  the  Expense  account. 

Clearing  House. — A  Clearing  House  is  a  business  place  or  office  where  bankers  meet  and  make  daily  settle- 
ments with  one  another,  by  paying  or  receiving  the  difference  between  their  accounts,  which  arises  from  the  checks 
drawn  by  the  depositors  of  the  various  banks.  For  example:  If  John  Smith  draws  a  check  for  $1000  on  the  Pacific 
Bank  which  was  afterward  deposited  with  the  California  Bank,  the  check  will  be  presented  on  the  following  day 
at  the  clearing  house  to  the  representative  of  the  Pacific  Bank,  who  will  give  in  exchange  such  checks  as  his  bank 
has  taken  in  against  the  California  Bank,  which  have  been  drawn  by  their  depositors,  aggregating  $750,  thus 
paying  $250,  and  effecting  a  settlement  in  full  of  account  to  date. 

A  clearing  house  is  simply  a  business  office  that  has  been  established  by  an  association  of  bankers  for  the 
purpose  of  settling  daily  their  claims  against  one  another,  the  same  as,  or  similar  to,  the  manner  described. 

Controlling  Interest. — If  a  stockholder  owns  one  share  more  than  half  the  total  number  of  shares  of  the 
capital  stock,  he  is  said  to  hold  a  Controlling  Interest.  It  is  often  a  difficult  matter  to  use  this  controlling  interest 
to  the  disadvantage  of  other  stockholders.  To  vote  himself  a  large  salary  or  to  get  other  undue  advantage,  some- 
one must  first  move  to  give  him  large  salary  or  other  advantage;  another  must  second  the  motion.  This  can  be 
brought  about  by  giving  or  selling  at  nominal  price  one  or  more  shares  to  persons  called  "Stool  Pigeons"  or  "Dead 
Heads,"  who  will  act  as  he  directs.  But  persons  that  will  stultify  their  manhood  and  self-respect  in  such  manner 
are  not  to  be  trusted,  and  are  liable  to  turn  their  balance  of  power  with  other  stockholders  at  any  time.  Their 
honor  has  been  bought  once;  it  can  be  bought  again. 

The  Pivotal  Account  or  Pivotal  Plan  of  Keeping  Books. — The  Investment  account  is  called  Pivotal 
account  when  the  purpose  is  not  to  disclose  the  proprietor's  name  and  such  other  accounts  as  rent,  bills  payable, 
clerk  hire,  etc.,  which  if  disclosed  might  work  detriment  to  the  business.  This  plan  is  applicable  to  both  large  and 
small  establishments.  The  account  is  often  opened  in  large  establishments  and  handled  in  about  the  same  way  as 
a  private  account.  Whether  applied  in  a  large  or  a  small  business,  the  bookkeeper  closes  the  Loss  and  Gain  account 
into  Undivided  Profits  if  a  gain,  or  into  Impairment  account  if  a  loss. 

Precedence  of  Closing  Accounts. — Every  account  affecting  merchandise  account  should  be  closed  into 
that  account  before  the  Retd  Mdse.  account  is  closed  into  Mdse.  account.  Every  account  affecting  general  expense 
should  be  closed  into  the  Loss  and  Gain  account  before  the  Loss  and  Gain  account  is  closed.  A  bookkeeper  wa„ 
hired  at  $100  a  month  and  ten  per  cent  of  the  net  profits.  He  took  ten  per  cent  of  the  profits  before  he  closed  his 
own  account  into  the  Loss  and  Gain  account.     Did  he  observe  Precedence  of  closing  accounts? 

First  Opening  of  Books. — If  a  student  should  be  called  J.o  a  position  where  no  books  had  been  kept,  he  should 
proceed  as  follows: 

(a)  He  should  make  a  complete  and  exhaustive  list  of  Resources  from  such  records  and  other  data  as  had 
been  kept,  and  from  such  information  as  he  could  gather  from  the  proprietor.  He  should  list  the  inventories  in  the 
Journal.  List  each  Resource  Inventory  separately  and  set  the  estimated  or  cost  value  in  the  debit  column.  Set 
the  total  of  the  Resources  in  the  credit  column. 

The  following  is  a  suggestive  list  of  Resource  items:  , 

(1)  List  all  Cash. 

(2)  List  all  unsold  or  unused  stock  (merchandise  or  manufactured  goods  unsold). 

(3)  List  all  real  estate. 

(4)  List  all  horses,  wagons,  office  furniture,  office  fixtures,  tools,  implements,  and  any  other  items  belonging 
to  the  business. 

(5)  List  unused  rent,  unused  fire  insurance  premiums,  life  and  accident  policies,  if  pledged  for  loans,  unused 
office  books  and  stationery,  taxes  paid  in  advance,  shipments  unsold,  etc. 

(6)  List  accrued  interest  due  the  firm. 

(7)  List  all  overdrafts  due  the  firm,  rents  and  salaries  due  the  firm,  etc. 

(8)  List  all  bills  receivable,  due  bills,  and  judgments  in  our  favor  (list  due  bills  in  names  of  persons  giving 
them). 

(9)  List  all  bonuses,  franchises,  or  charters,  copyrights,  trademarks,  leases,  licenses,  concessions,  good  will, 
if  any  basis  on  which  to  establish  the  measure  of  good  will,  etc. 

(10)  List  all  personal  accounts  due  the  firm, 


242  MISCELLANY 

(11)  List  all  loans  due  the  firm. 

(12)  List  all  money  paid  out  for  material  or  labor  on  unfinished  contract,  less  any  advance  payment  on  such 
contract. 

(13)  List  all  notes  or  other  property  deposited  with  any  bank  or  person,  as  collateral  security,  if  by  such 
deposit  the  business  incurred  a  liability. 

(14)  List  any  property  of  any  nature  whatever  not  already  listed. 

(b)  He  should  make  complete  and  exhaustive  list  of  Liabilities  of  the  firm.  The  opposite  of  the  Resource 
items  will  suggest  liabilities.  List  each  liability  inventory  separately  and  set  the  estimated  or  cost  value  in  the 
debit  column.     Set  the  total  in  the  credit  column.     Look  especially  for  interest,  freight,  and  unsold  consignments. 

(c)  Give  the  proprietor's  account  credit  for  the  difference  between  the  Resources  and  the  Liabilities.  (If 
the  proprietor  wants  Private  account  opened  his  Stock  account  must  be  reduced  by  the  amount  of  Private  account.) 

(d)  Write  the  Opening  Statement,  debiting  the  Resources  and  crediting  the  Liabilities.  See  par.  15  (2) 
(c)  and  (3)   (c). 

(e)  Post  all  accounts  in  the  Opening  Entry  to  the  Ledger. 
(/)  Take  Trial  Balance  and  the  books  are  open. 

The  Postage  Account. — The  Postage  account  is  debited  and  cash  credited  when  Postage  Stamps  are  bought. 

If  a  customer  pays  part  or  all  of  his  account  in  stamps,  postage  is  debited  and  the  customer  credited. 

Each  department  of  the  business  is  debited  daily  through  the  Stamp  Record  with  the  stamps  it  uses. 

At  each  profit -taking  period,  the  postage  account  is  credited  with  the  total  disbursements  to  the  several  depart- 
ments, and  each  department  is  debited  with  the  total  amount  of  stamps  it  has  used  for  that  period. 

The  postage  account  is  balanced  each  day  in  the  Stamp  Record,  and  closed  into  balance  in  the  Ledger  -at 
each  profit-taking  period. 

Traveling  Expenses. — This  account  should  be  kept  with  each  traveling  agent  for  his  necessary  traveling 
expense,  such  as  salary,  railroad,  steamboat,  and  stage  fare,  hotel  bills,  transfer  of  baggage,  etc.  This  account  should 
include  the  agent's  salary. 

Power  of  Attorney. — A  bookkeeper  may  indorse  checks,  drafts,  or  other  of  the  firm's  papers,  for  deposit, 
by  getting  a  written  order  from  the  proprietor  asking  the  president  or  the  cashier  of  the  bank  to  recognize  such 
indorsement.  But  to  sign  checks,  drafts,  notes,  or  other  papers,  he  must  first  get  the  Power  of  Attorney,  invest- 
ing him  with  such  power. 

The  Blotter. — A  Blotter  is  a  counter  book  in  which  is  written  in  pencil  memoranda  of  various  transactions 
of  the  day,  which  are  to  be  recorded  in  the  permanent  books  by  the  bookkeeper.  This  book  has  largely  taken  the 
place  of  the  day  book,  and  the  blotter  and  the  day  book  are  spoken  of  interchangeably. 

Waive  Protest. — "Protest  Waived,"  written  or  printed  above  an  indorsement  will  prevent  the  paper  from 
being  protested  and  save  protest  fees,  should  the  paper  not  be  paid  when  due.  A  waiver  may  facilitate  the  dis- 
posal of  a  paper,  but  the  legal  effect  of  a  waiver  should  be  thoroughly  understood  before  it  is  used.  Consult  your 
Commercial  Law  book  or  ask  your  teacher  to  explain  the  legal  effect  of  a  waiver. 

Loss  Posted  to  Resource  Accounts. — A  printing  press  broke  down  and  the  cost  for  making  it  "as  good  as 
new"  was  $500.  This  $500  was  posted  to  the  Machinery  account,  which  made  the  Machinery  account  show  a  cost 
of  $60,500  instead  of  $60,000.  The  $500  should  have  been  posted  to  Repair  account,  which  account  would  have 
been  closed  into  Loss  and  Gain. 

Insolvency  Account. — If  required  to  show  the  amount  of  the  Insolvency  in  an  account,  open  an  Insolvency 
account,  and  close  the  Loss  and  Gain  account  into  Insolvency  account,  and  then  close  the  Insolvency  account  into 
Proprietor's  account. 

Good  Will. — Good  Will  is  the  estimated  worth  of  the  patronage  of  a  business.  It  is  a  fictitious  asset,  as  it 
has  no  tangible  value,  and  yet  it  is  often  of  great  worth. 

An  account  is  often  opened  with  Cood  Will  when  there  is  no  thought  of  selling  the  business;  and  the  account 
is  debited  with  the  estimated  worth  of  the  patronage  in  order  to  swell  the  resources  of  the  business.  As  a  matter 
of  fact,  the  Good  Will  account  is  sometimes  put  unreasonably  high  in  order  to  cover  up  a  real  insolvency. 

When  a  sale  of  the  business  is  contemplated,  the  question  of  Good  Will  always  comes  up.  Then  the  Good 
Will  account  is  debited  for  the  amount  paid  for  the  patronage  of  the  business  and  at  each  profit -taking  period  it  is 
the  general  custom  to  inventory  the  account  and  to  write  off  some  per  cent  to  the  Loss  and  Gain  account. 

The  measure  of  the  Good  Will  of  a  concern  is  found  as  follows:  1.  Find  the  total  profits  for  the  five  years 
last  past.  2.  Take  seven  per  cent  interest  on  the  capital  stock  for  five  years.  3.  Subtract  the  amount  of  interest 
from  the  total  profits,  and  the  remainder  is  the  measure  of  the  Good  Will  of  the  concern. 

The  Good  Will  account  is  closed  into  Bal.  Inv'ry  and  Loss  and  Gain,  in  red  ink.  The  red  ink  Loss  and 
Gain  entry  is  carried  to  the  Loss  and  Gain  account  in  black  ink;  and  the  red  ink  Bal.  Inv'ry  entry  is  brought 
down  on  the  opposite  side  below  the  ruling,  and  in  black  ink. 

Trade  Mark. — A  Trade  Mark  is  a  distinguishing  mark,  or  device,  or  symbol,  adopted  by  a  manufactory  or 
other  business  concern.  The  trade  mark  is  impressed  on  all  advertising  literature,  stationery,  etc.,  and  is  often 
impressed  on  the  manufactured  article.  A  trade  mark  is  subject  to  registration  by  the  government,  and  when  regis- 
tered, it  is  protectable  by  law. 

The  value  of  a  trade  mark  is  largely  a  matter  of  estimate,  and  generally  an  arbitrary  amount  is  named. 

When  a  trade  mark  has  been  adopted  and  registered,  a  Trade  Mark  account  should  be  opened  and  the  account 
debited  for  the  estimated  worth  of  the  trade  mark. 

At  each  profit-taking  period  it  is  the  general  custom  to  inventory  the  account  and  to  write  off  some  per  cent 


MISCELLANY  243 

to  the   Loss  and   Gain  account.     As  the   life  of  the  trade  mark  is  thirty  years,  one-thirtieth  of  the  estimated 
value  is  often  written  off  as  each  profit -taking  period.      Renewable  for  thirty  years. 

The  Trade  Mark  account  should  be  closed  in  the  same  manner  as  the  Good  Will  account  is  closed. 
A  Bonus,  a  Lease,  a  Franchise,  a  License,  or  Concession  account  is  handled  in  the  same  way  as  the  Trade 
Mark  account,  except  that  the  life  of  these  accounts  is  generally  different  from  the  life  of  the  trade  mark;  and 
therefore  the  per  cents  written  off  differ. 

Patent. — A  Patent  account  is  handled  in  the  same  way  as  the  Trade  Mark  account.  The  life  of  the  Patent  is 
seventeen  years,  and  therefore  one-seventeenth  is  often  written  off  at  each  profit -taking  period.  Renewable  only 
by  special  act  of  Congress. 

Copyright. — A  Copyright  account  is  handled  in  the  same  way  as  the  Trade  Mark  account,  except  that  as  the 
original  life  of  the  copyright  is  twenty-eight  years,  with  privilege  of  renewal  for  fourteen  years,  one  twenty-eighth 
is  often  written  off  at  each  profit-taking  period. 

Judgment. — If  we  have  an  account  against  Jones,  for  $100,  and  sue  and  get  judgment,  then  Judgment  account 
should  be  debited  and  Jones  credited  for  $100.  As  the  judgment  will  draw  interest,    then,    when    the   judgment 

is  paid,  debit  Cash  for  the  face  of  the  judgment  plus  the  amount  of  the  interest,   and  credit  Judgment  for  the 
face  of  the  judgment,  and  interest  for  the  amount  of  the  interest. 

If  judgment  is  obtained  against  us,  then  the  foregoing  procedure  and  the  items  of  the  account  would  be 
reversed. 

Spot  Cash. — This  term  means  that  the  goods  must  be  paid  for  in  cash  upon  delivery.  When  a  discount  is 
allowed  for  "cash,"  it  is  understood  that  they  are  to  be  sold  for  "spot  cash,"  and  that  the  usual  thirty  days' 
credit  is  not  to  be  taken  advantage  of. 

Bankruptcy. — By  the  United  States  Bankruptcy  Law,  a  "bankrupt"  shall  include  a  person  against  whom 
an  involuntary  petition  or  an  application  to  set  a  composition  aside  or  to  revoke  a  discharge,  or  who  has  been 
adjudged  bankrupt. 

Voluntary. — Who  may  become  Bankrupts. — Any  person  who  owes  debts,  except  a  corporation,  shall  be 
entitled  to  the  benefits  of  this  act  as  a  voluntary  bankrupt. 

Involuntary. — Any  natural  person  except  a  wage-earner  or  a  person  engaged  chiefly  in  farming,  any  un- 
incorporated company,  and  any  corporation  engaged  principally  in  manufacturing,  or  mercantile  pursuits,  ow- 
ing debts  to  the  amount  of  one  thousand  dollars  or  over,  may  be  adjudged  an   involuntary  bankrupt. 

Acts  of  Bankruptcy. — Acts  of  bankruptcy  by  a  person  shall  consist  of  his  having  (1)  conveyed,  transferred, 
concealed  or  removed,  or  permitted  such  to  be  done  with  intent  to  hinder,  delay,  or  defraud  his  creditors;  (2) 
transferred,  while  insolvent,  any  portion  of  his  property  to  one  or  more  of  his  creditors;  (3)  suffered  or  permit- 
ted while  insolvent  any  creditor  to  obtain   legal   preference. 

Insolvency. — A  person  shall  be  deemed  insolvent  whenever  the  aggregate  of  his  property,  exclusive  of 
property  which  he  may  have  transferred  or  concealed,  with  intent  to  defraud,  shall  not,  at  a  fair  valuation,  be 
sufficient  to  pay  his  debts. 

Defense  of  Insolvency. — The  defense  against  insolvency  is  to  prove  that  one  is  solvent. 
The  full  text  Of  the  law  may  be  had  by  sending  10c.  to  the  Supt.  of  Documents,  Washington,  D.  C. 
Unusual  Losses  or  Unusual  Gains. — There  are  two  ways  of  treating  an  unusual  loss,  such  as  loss  by  fire, 
theft  of  property,  or  death  of  animals,  etc.  One  way  is  to  debit  Loss  and  Gain  at  the  time  of  the  occurrence  of 
the  loss,  and  credit  the  property  lost  or  destroyed.  The  other  way  is  to  make  no  entry  whatever,  but  allow  the 
loss  to  be  brought  out  in  the  inventory.  The  method  to  be  chosen  will  depend  on  the  kind  of  property  lost  and 
the  nature  of  the  business,  and  also  the  extent  of  the  loss.  If  cash  were  stolen,  the  Cash  Book  would  show  the 
balance  that  should  be  on  hand.  A  Loss  and  Gain  entry  would  be  the  only  entry.  If  the  business  were  of  such 
nature  as  not  to  admit  o."  keeping  a  stockbook,  such  as  the  retail  grocery  or  hardware  business  etc.,  and  a  loss 
of  merchandise  should  occur,  a  Loss  and  Gain  entry  would  be  the  only  entry;  while  if  the  business  were  such  as 
to  afford  an  accurate  account  of  stock  by  a  stockkeeper,  as  in  many  instances  in  factories,  then  only  a  mem- 
orandum note  of  the  loss  should  be  made,  and  the  loss  would  be  brought  out  in  the  inventory.  If  a  Loss  and 
Gain  entry  were  made  in  such  case,  memorandum  note  should  be  made  and  allowance  made  at  time  inventory 
is  taken  otherwise  the  loss  would  be  recorded  twice,  once  in  the  Loss  and  Gain  entry  and  again  in  the  inventory. 
If  there  were  complete  destruction  by  fire  the  lack  of  any  resource  inventory  would  show  the  merchandise 
and  store  or  factory  losses.  If  indemnity  is  expected  from  insurance  carried,  the  bookkeeper  should  not  make 
any  entry  until  after  adjustment. 

If  an  unusual  gain  is  met  with,  such  as  the  discovery  of  omitted  property  after  the  inventory  is  taken  and 
the  books  closed,  the  property,  such  as  merchandise,  chattels,  etc.,  should  be  debited  and  Loss  and  Gain  credited. 
A  memorandum  note  should  be  made  to  prevent  the  showing  of  a  double  gain  in  the  event  of  an  accurate  record 
of  sales  and  inventory. 

In  the  formation  of  partnerships  and  in  the  consolidation  of  corporations  it  is  customary  for  the  seller  to 
guarantee  the  payment  of  all  outstanding  personal  accounts  and  bills  receivable. 

In  event  of  the  failure  of  personal  accounts  or  bills  receivable,  the  seller  would  have  to  make  good  the  loss. 
In  such  event,  the  seller  should  be  debited,  and  Loss  and  Gain  credited. 

On  the  other  hand  if  some  resource  was  regarded  worthless  at  the  time  of  the  formation  of  the  partnership 
or  the  consolidation  of  the  corporation,  and  not  included  in  the  list  of  resources  that  th  :  buyer  bought,  and  should 
afterward  prove  of  value  and  be  paid,  such  value  belongs  to  the  seller  and  does  not  affect  the  books  of  the  part- 
nership or  the  consolidated  corporation. 

Again,  if  the  seller  should  omit  some  liability  or  understate  it,  or  some  resource  included  in  his  list  of  re- 
sources should  fail  or  partly  fail,  such  loss  would  fall  on  the  seller  and  would  have  to  be  made  good  by  him. 
In  such  case  the  seller  should  be  debited  and  Loss  and  Gain  credited, 


CHAPTER  XIII. — Returns  and  Rebates  or  Returned  fldse  Account 

An  account  should  be  opened  with  Returned  Mdse,  and  when  you  return  merchandise,  you  should  debit  the 
firm  the  merchandise  was  returned  to,  and  credit  Returned  Mdse.  When  merchandise  is  returned  to  you 
you  should  debit  Returned  Mdse,  and  credit  the  firm  returning  the  merchandise.  (In  case  of  many  "Returns"  it  is 
better  to  keep  book  of  "Returns."  Some  bookkeepers  use  the  right-hand  money  column  of  the  Purchase  Book  to 
record  any  returns  by  us  and  the  right-hand  money  column  of  the  Sales  Book  to  record  returns  to  us.  They 
then  in  the  Purchase  Book  credit  Accounts  Payable  Controlling  account  for  the  full  amount  of  purchases  and 
debit  Accounts  Payable  Controlling  account  for  the  amount  of  the  returns;  and,  in  the  Sales  Book  they  debit 


MERCHANDISE 


Ledger  Page 


19- 

Aug. 

2 

1                                 = 
Bal.  lnvry 

BBSS 

1200 

19- 

Aug 

3 

S 

98 

657 

19 

3 

P 

200 

248 

96 

4 

S 

99 

1700 

24 

5 

P 

201 

3295 

20 

6 

S 

100 

1875 

25 

8 

p 

202 

68 

74 

Total  Purchases* 

4812 

90 

Total  Sales 

4232 

68 

10 

Less  Returns 

L 

'  98 

160 

10 

Less   Returns 

L 

98 

95 

Net  Purchases 

4652 

90 

Net  Sales 

4137 

68 

10 

Freight 

L 

48 

35 

60 

10 

Mdse  Dis. 

L 

65 

25 

02 

10 

Dray  age 

L 

44 

3 

50 

10 

Mdse  Exch. 

L 

97 

75 

10 

Comission 

L 

42 

8 

90 

10 

Bal.  Invry  Mdse 

1000 

10 

Mdse  Exch. 

L 

97 

120 

10 

Invy   Mdse  Exch . 

L 

97 

80 

10 

Loss  and  Gain 

3° 

496 

80 

5317 

70 

5317 

70 

Aug. 

12 

Bal.  Invry 

1000 

Form    No.  1 


MDSE    EXCHANGE 


Ledger  Page  97 


19- 
Aug. 

2 

Machine  No.  672  J 

22 

50 

19- 
Aug. 

9 

Machine  No.  672 

S 

28 

75 

8 

Machine  No.  520  J 

23 

60 

10 

Mdse 

L 

96 

120 

8 

Repairs                C 

24 

4 

8 

Laboi                   C 

24 

6 

TO 

Mdse                   L 

96 

75 

195 

195 

Form  No.  2 


MDSE    EXCHANGE 


Ledger  Page  97 


19- 

Aug. 

2 

Machine  No.  672  J 

— — 
22 

50 

19- 

Aug. 

9 

Machine  No.  672        S 

28 

75 

8 

Machine  No.  520  J 

23 

60 

10 

Bal.  Invry 

80 

8 

Repairs               C 

24 

4 

8 

Labor                  C 

24 

6 

10 

Loss  and  Gam 

35 

155 

155 

19- 
Aug. 

12 

Bal.  Tnvrv 

80 

[244] 


RETURNS  AND  REBATES  OR  RETURNED  MDSE  ACCOUNT 


245 


Accounts  Receivable  Controlling  account  for  the  full  amount  of  the  sales  and  credit  Accounts  Receivable  Controll- 
ing account  for  the  amount  of  the  returns;  which  is  the  same  in  effect  as  to  handle  the  account  as  illustrated  in 
this  book.     Others  keep  this  account  in  the  Journal.     Much  depends  on  what  is  included  in  the  account.     Some 
limes  cash  is  returned  to  us  or  by  us.     In  that  event,  of  course,  that  much  of  it  would  fall  in  the  Cash  Book,  and 
the  Cash   Book  should  have  columns  for   Returns  and   Rebates.) 

See  pages  35  and  37  for  closing  Retd.   Mdse  account. 

Express,  Drayage,  Mdse  Discount,  and  all  similar  accounts  affecting  Mdse  account  would  be  closed  into  the 
Mdse  account.  All  such  accounts  should  be  closed  before  Retd  Mdse  account  is  closed,  except  when  it  is  desired 
to  show  net  purchases  and  net  sales,  rather  than  net  debits  and  net  credits. 


19- 
Aug 


Mdse 


RETURNS    AND    REBATES    OR    RETD    MDSE 


Ledger  Page  98 


R 


R 


20 


21 


96 


70 


25 


160 


255 


19- 
Aug. 


R 


Mdse 


20 


96 


160 


95 


255 


FREIGHT 


Ledger  Page  48 


19- 


35 


60 


19- 

Aui 


Mdse 


96 


JL 


6o 


DRAYAGE 


Ledger  Page  44 


19- 

Aug. 


23 


50 


19- 


Mdse 


96 


J2. 


COMMISSION 


Ledger  Page  42 


19- 

Aug. 


21 


90 


70- 

A.ug 


Mdse 


L  96  8       90 


MDSE     DISCOUNT 


Ledger  Page  65 


19- 
Aug. 

2 

C 

28 

10 

86 

19- 
Aug. 

4 

C 

29 

49 

96 

7 

C 

29 

14 

08 

10 

Mdse 

L 

96 

25 

02 

49 

96 

49 

96 

If  Mdse  Exchange  has  no  inventory  the  difference  between  the  two  sides  shows  the  loss  or  the  gain  on  the 
account. 

If  Mdse  Exchange  has  an  inventory,  its  inventory  should  be  added  to  its  credit  side  and  also  to  the  credit 
side  of  the  Mdse  account.  After  the  Mdse  Exchange  account  is  closed  into  Loss  and  Gain  its  inventory  should 
be  brought  down  on  the  debit  side  of  the  Mdse  Exchange  account       See  Forms  No.  1  and   No.   2. 

Form  No.  1  is  given  to  show  the  closing  of  Mdse  Exchange  account  into  the  Mdse  account,  for  the  purpose 
of  showing  the  loss  or  the  gain  on  the  Mdse  account  as  a  whole.  Form  No.  2  is  given  to  show  the  closing  of 
Mdse  Exchange  account  to  show  the  loss  or  the  gain  on  the  Mdse  Exchange  account.  It  is  desirable  to  know 
whether  it  is  profitable  or  not  (and  the  per  cent  of  loss  or  gain)  to  take  old  automobiles  or  other  old  machinery 
in  part  payment  of  new  machinery  and  to  add  additional  expense  in  the  way  of  material  and  labor  andto  sell  the 


246  RETURNS  AND  REBATES  OR  RETURNED  MDSE  ACCOUNT 

repaired  machines.     If  additional  space  should  have  to  be  rented  to  carry  on  the  repairs  the  charge  for  rent 
should  be  added  to  the  Mdse  Exchange  account. 

Note. — If  the  learner  will  notice  how  "Mdse  Dis."  "Ledger  Page  65"  is  closed  to  the  right-hand  side  of  Mdse  account,  and  how 
"Commission"  "Ledger  Page  42,"  is  closed  to  the  left-hand  side  of  Mdse  account,  and  so  on,  by  following  the  Ledger  references,  he 
will  see  how  all  these  accounts,  which  are  related  to  Mdse,  are  closed  into  Mdse  account. 


CHAPTER  XIV.— Laws  of  Carriers,  Shipments  in  Bond  and  Freight  Claims 

Classes  of  Carriers. — Carriers  are  of  two  kinds,  Private  Carriers  and  Common  Carriers.  A  Private  Carrier  is 
one  who  undertakes  to  carry  goods  for  particular  customers  only,  and  by  special  agreement.  A  Common  Carrier 
is  one  who  undertakes  to  carry  for  all  persons  who  offer  goods  and  the  charges  of  carriage.  Railroad  companies, 
express  companies,  steamship  companies,  teamsters,  and  truckmen,  are  familiar  examples  of  common  carriers. 

Liability  of  Private  Carriers. — A  private  carrier  is  liable  for  damage  or  loss  of  goods  intrusted  to  him  for  the 
transportation,  only  when  the  damage  or  loss  arose  through  his  failure  to  use  ordinary  care. 

Liability  of  Common  Carriers. — When  their  liability  is  not  qualified  by  contract  or  by  statute  common  car- 
riers are  responsible  for  all  loss  or  damage  during  transportation  arising  from  any  cause  what  oever,  except  the 
act  of  God  or  the  public  enemy.  This  sweeping  liability  of  the  common  carrier  is  usually  expressly  limited,  and  is 
often  entirely  extinguished  by  the  contract  between  the  carrier  and  the  shipper. 

Act  of  God. — Under  no  circumstances  can  a  carrier  be  held  liable  for  loss  or  damage  arising  through  an  act 
of  God.  The  expression  "Act  of  God"  means  such  irrepressible  disaster  as  results  immediately  from  natural  causes 
and  is  not  attributable  to  any  human  agency. 

Loss  or  Destruction  of  Goods. — If  goods  under  transportation  are  lost  or  destroyed  through  means  which 
the  carrier  might  have  prevented  by  the  exercise  of  due  care,  the  carrier  will,  in  general,  be  held  liable. 

Loss  from  Natural  Causes. — A  common  carrier  is  not  liable  for  loss  caused  by  frost,  fermentation,  evapora- 
tion, or  natural  decay,  or  from  the  natural  wear  and  tear  in  transportation,  provided  the  carrier  exercised  reasonable 
diligence  to  render  the  loss  as  slight  as  possible. 

Limitation  of  Liability.— All  courts  agree  that  the  carrier  may  make  a  valid  stipulation  with  the  shipper  that 
the  carrier  shall  not  be  held  liable  for  loss  or  damage  to  the  goods  carried,  arising  without  negligence  on  the  part 
of  the  carrier.  Some  courts  go  even  further  and  hold  that  a  common  carrier  may  contract  for  entire  immunity 
from  liability.  This  is  particularly  true  when  the  carrier  contracts  for  some  special  service  out  of  the  ordinary 
course  of  his  business. 

Loss  on  Connecting  Line. — A  carrier  may  make  a  valid  stipulation  against  liability  for  loss  arising  on  the 
line  *of  a  connecting  carrier. 

Liability  for  Its  Own  Negligence. — In  the  absence  of  special  reasons,  it  is  generally   held    contrary  to  public 
policy  to  permit  a  carrier  to  contract  for  immunity  against  liability  arising  from  the  negligence  of  itself,  its  agents . 
and  servants.     Such  contracts  are  quite  generally  held  void. 

Stipulation  as  to  Value. — A  stipulation  that  the  carrier  shall  not  be  held  liable  for  an  amount  exceeding  the 
valuation  placed  upon  the  goods  by  the  shipper,  in  consideration  of  which  the  carrier  undertakes  to  transport  the 
goods  at  a  less  rate  than  would  be  asked  if  they  had  been  appraised  at  a  higher  value,  is  valid. 

Rules. —  Reasonable  rules  prescribed  by  common  carriers  and  brought  to  the  attention  of  shippers  will  be  sus- 
tained by  the  courts. 

The  Bill  of  Lading. — A  bill  of  lading  is  both  a  receipt  and  a  contract.  It  is  a  receipt  for  the  goods  delivered 
to  the  carrier;  it  is  a  contract  to  carry  the  goods  safe  so  received.  Bills  of  lading  are  evidence  of  property. 
A  carrier  who  delivers  goods  to  a  consignee  without  production  of  the  bill  of  lading,  does  so  at  his  own  risk. 
If  the  goods  are  delivered  to  one  not  entitled  to  receive  them,  the  carrier  will  be  held  liable. 

Draft  with  Bill  of  Lading. — When  a  shipper  names  himself  or  his  agent  as  consignee  and  sends  a  bill  of  lading 
with  the  draft  attached  for  collection  as  a  condition  precedent  to  delivery,  title  remains  in  the  shipper,  or  his  as- 
signs, until  the  bill  of  lading  passes  into  the  hands  of  the  consignee  by  a  payment  of  the  draft. 

Discrimination  in  Rates. — A  common  carrier  has  no  right  to  discriminate  between  members  of  the  public. 
The  carrier  must  serve  all  alike  and  for  like  compensation. 

Stoppage  in  Transitu. — When  a  shipper,  while  goods  are  in  the  hands  of  a  carrier,  discovers  that  the  con- 
signee is  insolvent,  he  may  stop  delivery  of  the  goods  by  giving  the  carrier  notice  not  to  deliver  them.  This  is 
known  as  "stoppage  in  transitu."  The  carrier  may  lawfully  require  indemnity  from  the  shipper  before  making  the 
stoppage  effective.  The  right  of  stoppage  in  transitu  is  based  upon  the  plain  principle  that  one  man's  goods  should 
not  be  used  to  pay  another  man's  debts.  The  right  can  be  exercised  only  in  cases  where  the  vendee's  insolvency  was 
unknown  to  the  vendor,  at  time  of  sale,  or  when  it  occured  after  the  sale.  It  must  be  exercised,  if  at  all,  before 
delivery  of  the  goods  has  been  made  to  the  vendee.  After  delivery,  it  is  too  late.  If  the  vendor  knew  that  the 
vendee  was  insolvent  at  the  time  of  sale,  and  chose  to  take  the  risk,  he  cannot  afterward  exercise  stoppage  in 
transitu. 

How  to  Ship  Goods  in  Bond . — The  shipper  will  have  to  go  to  his  nearest  Customs  House  with  his 
shipping  order.  At  the  Customs  House  he  will  have  to  fill  out  a  manifest.  A  manifest  is  a  shipping  order 
used  by  the  government.     IN  BOND  means  corded  and  sealed,  and  remaining  in  care  of  the  government. 

In  shipping  goods  in  bond,  it  is  well  to  observe  these  directions: 

(1)  Direct  your  shipper  to  ship  your  goods  to  be  cleared  in  your  nearest  or  home  Customs  House.  Clearing 
the  goods  means  paying  the  duty  on  them. 

(2)  Instruct  your  shipper  to  ship  your  goods  "without  appraisement."  This  he  can  do  by  writing  "without 
appraisement"  on  the  face  of  the  Bill  of  Lading. 

These  instructions  will  prevent  some  port  broker,  at  landing  of  the  vessel,  from  clearing  the  goods  at  an  extor- 
tionate price. 


LAWS  OF  CARRIERS,  SHIPMENTS  IN  BOND  AND  FREIGHT  CLAIMS  247 

To  exemplify:  Suppose  you  want  to  ship  goods  from  Amsterdam,  Holland,  to  Indianapolis,  Ind.  Instruct 
your  shipper  in  Amsterdam  to  write  on  the  Bill  of  Lading:  "Ship  in  Bond  direct  to  Indianapolis,  Ind.,  U.  S.  A.,  con- 
signed Merchants'  Dispatch,  without  appraisement.     Goods  to  be  cleared  in  Indianapolis,  Ind.,  U.  S.  A." 

If  you  want  goods  shipped  by  some  other  railroad  or  some  express  company,  name  that  railroad  or  express 
company  instead  of  the  Merchants'  Dispatch. 

If  goods  are  shipped  in  bond  C.  O.  D.,  a  draft  need  not  be  drawn.  Such  goods  are  shipped  "to  order"  and 
after  the  Customs  House  collects  its  charges,  the  consignee  will  have  to  pay  the  carrier's  charges  before  he  can  get 
the  goods. 

Instructions  for  Shi  pping  Goods  in  Bond  (Given  by  a  large  brokerage  firm.) — These  instruc- 
tions are  correct  as  per  U.  S.  Customs  Laws,  and  should  be  carefully  complied  with : 

(1)  Every  package  must  be  distinctly  marked  with  name  or  shipping  mark  of  consignee,  and  have  Bill  of 
Lading  and  Invoice  made  out  bearing  same  mark  as  goods. 

(2)  Every  package  must  be  distinctly  marked  "In  bond  to " 

(Insert  port  of  destination  in  blank.) 

(3)  Present  your  invoice  to  the  U.  S.  Consul  for  certification.     The  Consul  will  return  two  copies. 

(4)  Mail  immediately  one  certified  invoice  to  R.  F.  Downing  &  Co.,  13  Williams  St.,  N.  Y.,  and  the  other  to 
the  consignee.     (If  you  are  not  shipping  through  R.  F.  Downing  &  Co.,  name  your  own  shipper.) 

(5)  Instruct  the  Forwarding  Agent  to  mail  a  copy  of  the  Bill  of  Lading  to  R.  F.  Downing  &  Co.,  by  steamer 
carrying  the  goods,  or  by  first  mail  steamer,  and  mail  all  other  documents  to  the  address  of  the  consignee. 

Note. — If  the  certified  invoice  and  Bill  of  Lading  do  not  reach  R.  F.  Downing  &  Co,  as  soon  as  the  goods 
arrive  at  New  York,  the  goods  will  be  sent  to  "General  Order  Warehouse"  by  customs  officers,  thereby  incuning 
great  expense  and  delay.  If  value  of  goods  is  less  than  One  Hundred  Dollars  ($100.00)  no  consular  invoice  is 
required,  and  goods  can  go  forward  in  bond  without  examination  by  customs  at  New  York,  but  a  complete  detail 
of  goods  and  values  must  be  produced.) 

How  to  Handle  Freight  Claims. — When  any  difference  arises  between  the  Consignee  and  the  Railroad 
Company,  it  will  make  the  adjustment  of  such  differences  much  easier  if  the  matter  is  handled  in  the  usual 
manner  prescribed  by  the  transportation  companies,  and  the  following  suggestions  are  offered  as  applying  to 
any  case  of  a  misunderstanding  regarding  freight  or  for  loss  or  damage  of  goods. 

To  Prevent  Disputes. — Always  look  over  your  freight  bills  before  you  sign  the  receipt  showing  that  everything 
is  O.  K. 

Notice  whether  the  number  of  packages  is  correct,  and  also  notice  whether  or  not  they  are  all  in  good  con- 
dition. 

Also  notice  the  weight  at  which  the  different  items  are  billed. 

In  case  of  any  error,  ask  your  agent  to  make  correction  before  you  sign  for  the  goods  and  pay  the  freight, 
or,  if  he  will  not,  or  cannot  make  the  correction  asked,  have  him  give  you  a  suitable  notation  on  your  freight  bill. 

Do  not  let  your  agent  put  you  off  with  the  statement  that  he  will  "send  a  notation  in  to  the  Company;" 
or  the  statement  that  "you  will  have  to  take  the  matter  up  with  the  shippers."  There  is  only  one  way  that  the 
Railroad  Company  will  adjust  disouted  matters  of  this  kind,  and  that  is  by  a  proper  claim  being  put  in,  and 
this  claim  will  not  and  cannot  prove  anything  without  your  agent's  notation. 

If  you  sign  the  receipt  without  such  notation  the  railroad  company  has  your  own  signature  to  the  statement 
that  you  have  received  all  of  the  goods,  and  that  they  were  in  good  condition. 

If  you  carelessly  sign  a  freight  bill  for  goods  that  you  do  not  receive  or  for  goods  that  are  damaged,  you 
should  not  ask  shippers  to  assume  the  risk. 

CARRIERS'  RESPONSIBILITY. — Shippers  are  not  responsible  for  loss  of,  or  damage  to,  goods  in  the  hands 
of  railroads,  express  or  other  transportation  companies;  neither  are  they  responsible  for  overcharges  of  any  kind  on 
the  part  of  such  companies. 

Shipper's  responsibility  ceases  when  your  goods  are  delivered  to  the  carrier  and  their  receipt  taken  for  such 
goods.  In  case  of  any  dissatisfaction  resulting  from  error  or  negligence  on  such  carrier's  part,  your  recourse  is  on 
the  carrier,  and  not  on  shippers. 

Shortage,  or  Damage. — If  there  is  a  shortage  of  items  or  if  there  are  any  of  the  boxes  or  packages  that 
appear  to  have  been  tampered  with,  or  that  are  damaged,  INSIST  upon  your  agent's  making  a  suitable  notation  on 
your  freight  bill  before  it  is  paid.     Then  save  your  freight  bill  for  prof. 

It  is  your  right  to  insist  upon  this  notation,  for  it  is  the  only  evidence  that  you  can  offer  that  you  have  not 
received  the  full  amount  of  goods,  or  that  everything  is  not  as  it  should  be. 

Overcharges. — In  case  you  have  been  overcharged,  either  in  rate  or  in  the  amount  of  weight  and  your  agent 
will  not  voluntarily  make  correction  before  the  bill  is  paid,  insist  upon  correction  or  suitable  notation  just  the 
same  as  if  the  goods  had  been  short  or  had  been  damaged. 

Claims. — Any  disputed  matter  that  your  agent  cannot  or  will  not  adjust,  will  usually  receive  due  attention 
if  properly  presented  to  the  Railroad  Company's  claim  department,  and  it  is'for  the  purpose  of  giving  the  facts  in 
the  case  that  your  agent's  notation  is  insisted  on. 

A  claim  should  always  be  entered  for  any  loss,  damage,  or  overcharge  for  which  the  railroad  company  is 
responsible,  and  which  cannot  be  adjusted  by  other  means. 

Transportation  companies  are  as  desirous  to  treat  their  customers  well  as  merchants  are,  and  by  following  the 
plan  outlined  above  you  will  protect  both  yourself  and  the  shippers  and  secure  proper  adjustment  of  any  errors  on 
the  part  of  the  company's  agents  or  employees. 

Payment. — In  case  of  such  loss,  damage,  or  overcharge,  commercial  laws,  as  well  as  usage,  require  payment  tc 
be  made  in  full  to  shipper. 


248 


LAWS  OF  CARRIERS,  SHIPMENTS  IN  BOND  AND  FREIGHT  CLAIMS 


It  would  be  an  injustice  to  ask  the  shipper  to  stand  a  loss  for  which  he  is  in  no  wise  to  blame  and  for 
which  you  have  recourse  upon  the  responsible  party. 

Notes. — Goods  should  be  carefully  packed,  but  Railroad  Companies  frequently  inspect  packages  for  evidence 
of  wrong  classification,  and  have  the  power  to  raise  weights  or  classifications  at  will  of  Inspector  and  in  such  cases 
goods  are  often  thrown  back  in  the  boxes  in  disorder  or  more  or  less  damaged. — Such  cases  are  to  be  treated  as 
noted  above.      (Loss  or  damage.) 

Railroad  Companies  set  their  own  weights  on  goods  shipped.  No  matter  what  weights  are  given  by  the  ship- 
per, the  R.  R.  Co.  can  change  them  at  will,  and  on  this  account  you  should  not  hold  shipper  responsible  where 
goods  are  billed  above  actual  weights. 

Entering  a  Railroad  Claim.-— Unless  Railroad  Claims  are  properly  presented  and  accompanied  by  required 
proof,  they  will  not  receive  consideration.  Hence  it  is  well  to  use  care  in  making  them  out,  and  to  keep  a  record 
of  all  waybill  numbers,  dates,  amounts,  etc.,  so  that  they  may  be  referred  to  in  future  correspondence  regarding 
your  clam. — Your  freight  bills  show  all  numbers,  etc.,  that  are  required. 

The  form,  or  wording,  of  a  claim  is  immaterial,  but  the  claim  must  show  wherein  the  Railroad  Company  is  at 
fault,  and  it  must  be  accompanied  by  the  original  Bill  of  Lading  and  the  original  Freight  Bill;  and,  if  the  claim 
is  for  loss  or  damage,  by  the  original  invoice  for  the  goods.  If  originals  cannot  be  found  copies  can  usually  be 
substituted  if  the  claimant  will  guarantee  against  further  claims. 

The  best  and  most  simple  manner  of  entering  a  claim  is  about  as  shown  below,  as  it  contains  a  record  of 
all  numbers,  dates,  etc.,  and  a  list  of  papers  that  are  attached.  This  list  is  a  check  against  any  of  the  papers 
being  removed  or  lost. 


CLAIM   BLANK 


(City  and  State) 


(Date) 


Mr. 


( Agent V  Name  and  Title) Agent, 


(Name  of  R.  R.) 


-,      19 

_R.  R.  Co. 


(City  and  State) 


Claimant's 

Number 

R.  R.  Co.'s 

Number 

Total 
Amount 


I  (or  we)  hereby  make  claim  for_ 

Shipment  made  from 

Shipped  by 


(Loss,  Damage,  or  Overcharge) 

to   

to 


on  shipment  as  listed  below: 


Date  of  Bill  of  Lading 

Date  of  Waybill 

Pro.  No. • 


Date  of  Freight  Bill 
.Waybill  No. 


Car  Number. 


Weight  Billed 


(for  use  if  overcharged) 


Actual  Weight. 


(for  use  if  overcharged) 


Amount     Charged  (for  use  if  overcharged) 


Correct    Amount 


(for  use  if  overcharged) 


Claim  is  for  the  following  items 


(State  whether  lost,  damaged,  or  overcharged) 


(Claim  Blank  should  have  a  number  of  ruled  lines  here,  and  on  them  should  be  listed  clearly  each  and  every  item  of  the  claim, 

giving  prices  or  amounts  just  as  given  in  an  invoice  for  *a  bill  of  goods.) 


Attached  find : 

Original  Bill   of  Lading.        (Needed  in  all  claims.) 

Original  rreight  Bill.     (Needed  in  all  claims.     Should  also  mention  here  any  loss  or  damage  shown  by  this  paper.) 

Original  Invoice.     (If  for  loss  or  damage  claim.) 

(Itemize  here  any  other  papers  you  may  attach  to  substantiate  your  claim.     Your  carbon  copy 
will  prove  just  what  evidence  you  have  submitted.) 


Signed, 


(Claimant's  Signature.) 


The  claimant  should  keep  a  carbon  copy  of  the  claim,  so  that  he  may  know  positively  just  when  and  in 
what  manner  his  claim  was  made  out.  The  Railroad  Company  may  lose  your  claim,  but  your  copy  will  show 
positively  just  what  papers  you  surrendered  with  your  claim.  In  most  cases  it  is  preferable  that  the  claim  be  sent 
direct  to  the  Company's  Claim  Agent,  rather  than  to  your  local  agent 

If  claim  is  not  settled  within  a  reasonable  time,  write  your  claim  agent,  stir  him  up  every  three  or  four  weeks. 


UOCHBULHRY   OF  MERCANTILE  TERMS 


Abandonment.  —  In  marine  insurance,  the  surrender 
Of  a  ship  or  of  goods  by  the  owners  to  the  underwriters. 

Abatement. — A  sum  deducted  from  the  face  of  a  bill 
or  debt,  for  damage,  overcharge,  prepayment,  etc.;  a  dis- 
count or  rebate. 

Acceptance.  —  The  act  of  honoring  or  accepting;  also 
the  instrument  accepted. 

Accommodation  Paper.  —  A  note,  draft,  acceptance, 
or  other  paper  issued  to  enable  the  person  receiving  it 
to  borrow  money  or  get  credit,  and  not  as  an  evidence  of 
indebtedness  on  the  part  of  the  person  giving  the  paper. 

Account. —  A  subdivision  of  the  Ledger  for  recording 
the  debits  and  credits  that  relate  to  a  person  or  firm,  or  to 
a  special  class  of  transactions. 

Accountant. —  One  skilled  in  the  theory  and  art  of 
accounting  ;  a  bookkeeper. 

Account=Current. —  A  special  itemized  statement  of 
the  business  transactions  between  two  persons  or  firms, 
for  a  given  period  during  which  each  has  had  dealings 
with  the  other  on  account.  The  account-current  is  usually 
an  itemized  transcript  of  the  Ledger  account,  and  made 
out  with  the  view  of  ascertaining  the  equated  cash  bal- 
ance- 

Account  Purchase. —  A  detailed  statement  rendered 
by  an  agent  to  his  principal,  showing  the  particulars  of 
purchase,  expense,  and  gross  cost. 

Account  Sales. —  A  detailed  statement  rendered  by  a 
commission  merchant  to  his  principal,  showing  the  par- 
ticulars of  sales,  expenses,  and  net  proceeds. 

Accrued. —  Interest  due  to  date. 

Adjustment. —  An  agreement  as  to  an  account  or 
claim ;  a  settlement.  In  insurance,  the  act  of  ascertain- 
ing the  amount  of  the  indemnity  due  the  insured,  also  the 
apportioning  of  the  amount  among  the  underwriters. 

Adjustment  Entry. —  An  entry  for  the  purpose  of  cor- 
recting an  error. 

Administrator. —  One  who  is  legally  appointed  to  man- 
age the  affairs  of  the  estate  of  a  deceased  person. 

Ad  Valorem. —  According  to  value. 

Adventure.— Property  invested  or  ventured  in  a  par- 
ticular enterprise;  a  speculation  ;  a  shipment,  especially, 
a  shipment  at  sea. 

Advance. —  Increase  in  price  ;  money  paid  on  goods 
before  they  are  delivered. 

Advice. —  Announcement  by  letter,  usually  of  goods 
Shipped  or  of  bills  sent  for  acceptance  or  collection. 

Affidavit. —  A  special  sworn  statement  in  writing. 

Agent. —  One  who  acts. in  a  legal  capacity  for  another; 
a  legal  representative. 

Antedate. —  To  date  before  the  real  time. 

Appraiser. —  One  who  sets  a  value  upon  property. 

Appurtenances.—  Things  going  with,  or  belonging  to. 

Arbitration. —  A  method  of  settling  differences,  by 
referring  the  matter  in  controversy  to  the  decision  of  dis- 
interested parties. 

Arrears. —  A  sum  or  sums  not  paid  when  due. 

Articles  of  Copartnership. —  The  written  instrument 
or  contract  by  the  terms  of  which  a  copartnership  is 
formed. 


Assets. —  Resources  consisting  of  property,  money  or 
collectible  debts,  or  of  anything  convertible  into  money. 

Assessment. —  Valuation  of  property  for  the  purpose 
of  taxation  ;  an  amount  to  be  collected  from  stockholders 
of  corporations  to  meet  expenses,  pay  debts,  etc. 

Assignee. —  One  to  whom  is  transferred  the  possession 
of  property  to  be  managed  or  disposed  of  for  tne  benefit  of 
the  creditors  of  an  insolvent  person,  firm,  or  corporation. 

Assignor. —  One  who  transfers  his  property  to  an  as- 
signee for  the  benefit  of  his  creditors. 

Assignment. —  The  act  of  transferring  property  to  an 
assignee.     (See  "Assignee.") 

Assume. —  To  undertake  a  responsibility,  as  to  assume 
the  payment  of  a  debt,  or  the  disposal  or  control  of 
property. 

Association. —  A  union  of  several  persons  for  the  carry* 
ing  out  of  some  undertaking. 

Assurance. —  Guaranty  against  loss;  insurance. 

Attachment. —  A  legal  writ,  or  order,  authorizing  the 
seizure  of  property  for  the  satisfaction  of  a  debt  or  claim. 

Attorney. —  A  general  agent ;  a  lawyer. 

Audit. —  To  examine  and  verify  accounts. 

Auditor. —  One  who  examines  and  verifies  accounts. 

Avails. —  Proceeds  or  profits. 

Average. —  The  apportionment  of  losses  of  goods  at  sea ; 
to  find  the  equated  time  at  which  the  balance  of  an 
account  falls  due. 

Average  Investment. —  The  investment  which,  for  a 
given  time,  as  one  day,  or  one  month,  is  equal  to  one  or 
more  investments  for  different  times. 

Bail. —  Surety  for  the  appearance  of  a  person  at  a  trial, 
either  as  a  witness  or  to  answer  to  a  criminal  charge. 

Bailment. —  A  delivery  of  goods  to  be  held  in  trust. 

Balance. —  The  difference  between  the  two  sides  of  an 
account ;  to  close  an  account. 

Balance  of  Trade. —  The  difference,  in  value,  between 
the  imports  and  exp®rts  of  a  country. 

Bank  Balance. —  The  net  amount  due  to  a  depositor  by 
the  bank. 

Bank  Book. —  The  pass  book  of  a  depositor  in  which 
the  banker  records  the  amounts  deposited,  and  the  deposi- 
t  n'a  checks  which  have  been  paid  by  the  bank. 

Bankrupt. —  The  condition  of  being  unable  to  meet 
one's  financial  obligations ;  an  insolvent  debtor. 

Bearer. —  The  person  who  presents  for  payment,  a  note, 
check,  order,  etc. 

Bid. —  A  competitive  offer,  oral  or  written,  to  purchase 
or  sell  property,  or  perform  some  service  for  a  stated  sum. 

Bill. —  A  general  name  given  to  various  statements  in 
writing,  as  of  goods  sold,  services  rendered,  etc.;  a  note 
or  draft,  particularly  a  foreign  draft.  (See  "Bill  of  Ex- 
change.") The  finding  of  a  grand  jury;  a  proposed  law 
when  introduced  into  a  legislative  body. 

Bills  of  Exchange. —  A  foreign  draft,  sometimes  called 
simply  a  "bill." 

Bill  of  Lading. —  An  itemized  receipt  for  goods  deliv- 
ered to  a  transportation  company,  and  including  a  contract 
for  their  delivery  at  a  specified  place. 

Bill  of  Parcels. —  An  itemized  bill  or  list  of  goods  sold 


[249] 


250 


VOCABULARY  OF  MERCANTILE  TERMS 


including  a  statement  of  quantities,  prices,  terms,  etc.,  and 
given  by  the  seller  to  the  buyer. 

Bill  of  Sale. —  A  formal  instrument  transferring  the 
ownership  of  personal  property,  and  usually  given  as  se- 
curity for  the  payment  of  a  debt.  The  legal  effect  of  a  bill 
of  salens  to  transfer  ownership  without  possession. 

Board  of  Trade. —  An  incorporated  association  of  busi- 
ness men,  having  for  its  object  the  general  advancement  of 
commercial  and  business  interests.  Virtually,  the  same  as 
a  Chamber  of  Commerce  or  Merchant's  Exchange. 

Bona  Fide. —  In  good  faith  ;  genuine. 

Bond. —  A  written  instrument  given  under  seal  by  an 
individual,  a  firm,  or  a  corporation,  in  which  the  signer 
pledges  himself  to  do  or  not  to  do  some  specified  thing. 
The  term  is  also  applied  generally  to  the  interest-bearing 
obligations  of  municipal  and  private  corporations. 

Bonded  Warehouse. —  A  building,  or  warehouse,  in 
which  goods  subject  to  revenue  duties  are  stored  until  the 
importer  either  pays  the  duties,  or  re-exports  the  goods. 
In  case  the  goods  are  re-exported,  the  duties  are  not  re- 
quired to  be  paid.  The  owner  of  the  goods  must  give  a 
bond  for  the  payment  of  the  duties. 

Bottomry  Bond.— A  mortgage  on  a  vessel  itself,  as 
security, 

Breakage. —  A  deduction  from  the  cost  or  from  the 
duties  due  on  fragile  goods  as  glassware,  bottled  goods,  etc. 

Broker. —  A  term  applied  to  a  class  of  general  agents, 
or  middlemen,  through  whom  various  business  transac- 
tions are  effected,  and  various  contracts  are  entered  into 
by  other  parties. 

Brokerage. —  The  percentage  or  commission  charged 
by  a  broker  for  his  services. 

Bullion.—  Uncoined  gold  and  silver. 

Capital. —  Money  or  other  resources  invested  in  a 
business. 

Card  System. —  A  method  of  keeping  accounts  by 
means  of  cards  ruled  in  ledger  form  and  kept  in  alpha- 
betically arranged  cases,  with  accompanying  indexes. 

Cargo. —  The  total  lading  or  freight  of  a  vessel. 

Cash. —  Money  of  account  or  any  current  representative 
thereof,  as  banK  bills,  cnecks,  money-orders,  and  the  like. 

Cash  Balance.—  1  ne  equated  amount  due  upon  any 
open  account  at  a  given  date. 

Cashier. —  The  principal  financial  officer  of  a  bank  and 
who  has  personal  charge  of  the  c;ish  ;  in  general,  any 
custodian  of  the  cash  belonging  to  a  business  enterprise. 

Certificate.— Awntten  statement  formally  setting  forth 
some  fact  of  advantage  to  the  holder. 

Certified  Check — A  check  that  has  been  accepted,  or 
certified  to  by  the  bank  on  which  it  is  drawn. 

Charges.— A  general  term  including  the  expenses 
incurred  in  either  the  purchase  or  sale  of  goods,  as  coop- 
erage, drayage,  packing,  wharfage,  freight,  etc.   ' 

Charter  Party.— A  written  contract  for  the  hiring  or 
chartering  of  a  ship. 

Chattels.— Property  other  than  money  or  real  estate. 
In  a  broader  sense,  property  owned  by  a  mercantile  firm 
in  conducting  its  business  but  which  is  not  included  in 
the  stock  in  trade ;  such  as  scales,  delivery  teams,  trucks 
for  removing  merchandise,  etc. 

Check.— A  written  order  by  the  depositor  of  a  bank 
directing  the  payment  of  a  specified  sum  of  money. 

Circulating  fledium.— Coin  and  bank  notes,  or  paper 
convertible  into  money  on  demand  ;  currency. 

Clearance. —  A  certificate  authorizing  a  vessel  to  leave 
port. 

Clearing — The  exchanging  of  drafts  and  settling  of 
balances  between  different  banks. 


Clearing-house. —  The  place  where  clearings  are  ef- 
fected.    See  "Clearing." 

Collaterals. —  The  pledges  of  stock,  notes,  or  otuer 
valuables  for  loans  of  money,  or  other  indebtedness. 

Commerce. —  The  general  exchange  of  commodities 
between  states  or  nations  ;  trade. 

Commercial  Paper.— Bills  of  exchange,  drafts,  prom- 
issory notes,  checks,  etc.,  used  in  the  course  of  trade. 

Common  Carrier. —  Any  person  who  for  a  considera- 
tion undertakes  the  general  carriage  of  goods  or  persons. 

Compound. —  To  settle  with  a  debtor  or  creditor  by 
paying  or  receiving  a  part  of  the  amount  due  as  settle- 
ment in  full. 

Compromise. —  An  agreement  embracing  mutual  con- 
cessions. 

Consignment. —  Goods  shipped  to  a  commission  mer- 
chant and  to  be  sold  on  the  account  of  the  consignor. 

Consul. —  An  agent  for  a  government,  who  resides  in  a 
foreign  country,  chiefly  for  the  purpose  of  protecting  the 
commercial  interests  of  the  citizens  of  the  country  which 
he  represents. 

Contraband. —  A  term  applied  to  goods,  the  sale,  im- 
portation, or  exportation  of  which  is  prohibited  by  law; 
also  applied  to  goods  that  have  been  smuggled  or  imported 
into  a  country  without  payment  of  the  legal  duties. 

Contract. —  An  agreement  between  two  or  more  parties 
for  a  specified  consideration,  to  do,  or  not  to  do,  a  particu- 
lar thing. 

Copyright. —  The  right  allowed  bylaw  to  the  author 
of  any  book,  printed  article,  work  of  art,  etc.,  by  which  he 
is  entitled  to  the  sole  privilege  of  publishing  the  same. 

Cost  Hark. —  A  private  mark  in  cipher,  and  attached 
to  goods  in  order  that  the  merchant  or  salesman  who  han- 
dles the  goods  may  know  their  original  cost. 

Counter  Entry. —  An  entry  that  cancels  or  annuls  some 
previous  entry. 

Coupon.—  An  interest  certificate  attached  to  a  bond, 
and  representing  an  installment  of  interest  which  is  due 
at  a  specified  time.     When  paid,  the  coupons  are  cut  off. 

Coupon  Bonds.— Bonds  with  coupons  attached.  (See 
"Coupon.") 

Credentials. —  Written  authority  to  act  in  a  specified 
capacity ;  recommendations. 

Credit. —  Applied  to  the  right-hand  column  or  folio  of 
a  book  of  entry;  financial  standing;  allowance  of  time  in 
the  payment  of  a  debt ;  favorable  reputation. 

Cross  Entry. —  An  entry  that  adjusts  an  erroneous 
entry  that  has  previously  been  made  in  some  amount. 

Currency.  — That  which  circulates  as  lawful  money; 
the  circulating  medium. 

Customs.— The  duties  imposed  by  law  upon  imports 
and  exports.  In  the  United  States  there  are  no  customs 
upon  exports. 

Custom=house. —  The  office  where  vessels  are  cleared 
and  where  duties  are  collected. 

Damages. —  A  sum  demanded  on  account  of  injury  to 
person  or  property. 

Dead  Freight.— The  amount  of  freight  paid  by  the 
charterer  of  a  vessel  for  that  part  of  the  vessel  which  he 
does  not  occupy ;  in  railroad  business  any  imperishable 
freight,  as  grain,  dry-goods,  coal,  etc.,  in  distinction  from 
live  freight  which  includes  live  stock,  dressed  meats,  fruits, 
vegetables,  and  other  perishable  products. 

Debenture. —  A  written  acknowledgment  under  seal, 
of  a  debt,  usually  applied  to  certificates  or  obligations  of 
corporations,  issued  in  a  form  to  be  conveniently  bought 
and  sold  as  investments,  also  in  customs  business,  a  cer- 
tificate of  drawback  entitling  the  importer  to  a  certain 


VOCABULARY  OF  MERCANTILE  TERMS 


251 


sum  of  money  from  the  government,  on  the  re-exportation 
of  specified  goods,  the  duties  on  which  have  been  paid. 

Debit.  — A  term  applied  to  the  left-hand  column  or 
folio  of  a  book  of  entry;  an  entry  on  the  debit  side ;  to 
enter  against,  or  charge. 

Deed. —  A  written  contract,  under  seal,  transferring  the 
title  to  real  estate. 

Debtor. —  In  debt  to;  one  who  owes  another. 

Defalcation. —  A  deduction  ;  a  fraudulent  deficiency  in 
money  matters  ;  a  breach  of  trust. 

Defaulter. —  One  who  fails  to  account  for  money  or 
valuables  entrusted  to  his  care. 

Delivery. —  Act  of  surrendering  or  transferring  pos- 
session. 

Demand. —  A  legal  presentment  of  a  claim  ;  a  formal 
asking  for  what  is  due. 

Demurrage. —  Forfeit  money  for  detaining  a  vessel  in 
port  longer  than  the  specified  time. 

Deposit  Slip. —  A  form  furnished  by  a  bank  to  a  de- 
positor for  the  purpose  of  recording  an  itemized  statement 
of  the  different  items  of  his  deposit. 

Depreciation. —  A  falling  off  in  value;  a  lessening  in 
price  as  compared  with  a  given  standard,  as  in  the  case 
of  stocks,  or  other  credits  which  are  said  to  be  "  depre- 
ciated "  when  they  are  rated  at  less  than  their  face  or  par 
value. 

Dishonor. —  A  refusal  to  accept  a  draft,  or  to  pay  an 
obligation  when  presented. 

Dockage.—  A  charge  for  the  use  of  a  dock  ;  a  deduc- 
tion from  wages. 

Dormant.— Not  acting;  applied  to  a  partner  who  takes 
Do  share  in  the  active  business,  but  who  shares  in  the 
losses  or  gains;  often  called  a  "silent"  partner. 

Double  Entry.  — A  system  of  bookkeeping  in  which 
equal  debits  and  credits  are  made  for  each  transaction. 

Draft. —  A  written  order  on  a  bank  or  person,  directing 
the  payment  of  money  to  some  person  or  firm  named  in 
the  draft. 

Drawback.— Duties  refunded  to  an  importer  upon 
goods  that  are  to  be  re-shipped  for  exportation. 

Drawee. —  The  person  upon  whom  a  draft  is  drawn. 

Drawer. —  The  person  who  signs  a  draft. 

Drayage. —  A  charge  for  the  transfer  of  goods  4>y  a 
drayman. 

Due=bill. —  A  brief  written  acknowledgment  of  a  debt, 
equivalent  in  effect  to  a  promissory  note. 

Duplicate. —  Consisting  of  two  parts ;  one  of  two  things 
that  are  exactly  alike  ;  to  make  an  exact  copy. 

Duties.— See  "CusUms." 

Earnest. —  Part  payment  of  money,  or  delivery  of  a  por- 
tion of  the  goods  sold,  as  an  evidence  of  a  contract  of 
sale. 

Effects. —  Any  kind  of  goods  or  property. 

Embargo. —  Act  of  a  government  prohibiting  ships 
from  leaving  port. 

Embezzlement. —  Unlawful  appropriation  of  money  or 
other  property  by  one  holding  it  in  trust. 

Emporium. —  A  commercial  center  ;  a  mart. 

Entry. —  The  formal  recording  of  a  transaction  in  any 
book  of  record ;  the  lodgment  of  a  ship's  papers  in  the 
custom-house  on  arrival  at  a  port  of  entry. 

Exchange. —  (1)  A  term  applied  to  the  settlement  by 
means  other  than  the  transmission  of  money  or  goods,  of 
accounts  between  persons  living  far  apart,  and  separated 
by  natural  boundaries.  When  such  adjustments  are  ef- 
fected between  residents  of  different  countries,  the  process 
is  known  as  Foreign  Exchange;  when  between  residents 
of  the  same  country  it  is  called  Domestic  Exchange.     Ex- 


change is  usually  effected  through  the  agency  of  banks. 

(2)  Bank  drafts,  Bills  of  Exchange,  or  other  negotiable 
orders  by  means  of  which  exchange  is  effected. 

(3)  The  amount  of  commission,  or  compensation,  paid 
to  a  bank  or  broker,  for  effecting  exchange.  This  may  be 
a  certain  percentage  of  the  face  of  the  draft  or  bill,  or  it 
may  be  a  fixed  fee  that  is  charged  for  the  issue  of  a 
draft  and  within  certain  limits,  regardless  of  the  face 
amount. 

(4)  The  rate  per  cent,  or  the  rate  of  charge  per  monetary 
unit,  for  the  issue  of  a  draft  or  bill.  In  England,  market 
quotations  of  exchange  are  expressed  in  pence  and  far- 
things, for  each  pound  sterling,  and  in  the  United  States  at 
certain  ra^e  per  cent  as  i%,  \%  etc.,  of  the  face  of  the 
bill. 

Executor. —  A  person  named  in  a  will  to  sett.'e  the 
estate  of  the  testator. 

Exports. —  Goods  shipped  or  exported  to  a  foreign 
country. 

Extension. —  The  total  amounts  of  the  separate  items 
in  a  bill,  invoice,  or  book,  carried  out  and  entered  in  the 
proper  column,  called  the  extension  column. 

Face. —  The  sum  of  money  named  in  a  note,  draft  or 
other  commercial  paper;  the  amount  of  a  bill  or  debt  irre- 
spective of  .aterest  charges,  discounts,  etc. 

Factor. —  An  agent  in  buying  or  selling;  a  commission 
merchant. 

Failure. —  Act  of  becoming  insolvent. 

Finance. —  A  general  term  relating  to  money  and  its 
investment  or  expenditure. 

Financier. —  One  skilled  in  finance ;  an  expert  in 
monetary  affairs. 

Firm. —  The  persons  forming  a  business  partnership; 
the  name  by  which  a  partnership  is  generally  known,  as 
the  firm  of  Hart  &  Son. 

Fiscal. —  Pertaining  to  the  revenues  or  finances  of  the 
government,  whether  national,  state,  or  municipal. 

Fiscal  Year. —  The  financial  year  of  a  business  firm, 
corporation,  or  governmental  department,  at  the  close  of 
which,  the  accounts  are  balanced  and  statements  of  the 
financial  operations  made  out.  The  fiscal  year  of  the 
United  States  Government  begins  July  1  of  each  year  and 
ends  June  30  of  the  following  year. 

Fixtures. —  The  immovable  furniture  of  a  store  or  office, 
as  the  counters,  shelving,  gas-pipes,  etc. 

Floating  Debt. —  The  miscellaneous  and  unfunded 
debts  of  a  government  or  corporation,  such  as  demand 
notes,  treasury  bills,  acceptances,  etc.,  due  at  different 
dates,  and  subject  to  liquidation  or  extension. 

Folio. —  A  page,  or  the  two  opposite  pages,  of  an  account 
book. 

Footing. —  Adding  a  column  of  figures ;  the  total  or  sum 
of  a  column  of  figures. 

Foreclose.—  To  enforce  the  terms  of  a  mortgage  by 
taking  legal  possession  of  the  mortgaged  property. 

Form. —  A  printed  blank  to  be  filled  out  by  the  inser- 
tion of  details,  as  the  form  for  a  note,  deed,  mortgage,  or 
the  like. 

Forced  Sale. —  A  sale  of  goods  or  other  property  made 
under  necessity  or  legal  compulsion. 

Free  Trade. —  The  policy  of  conducting  international 
commerce  without  duties;  also,  in  a  restricted  sense,  the 
policy  of  levying  the  duties  of  a  country  with  regard  solely 
to  revenue,  and  without  reference  to  the  protection  of  the 
country's  own  industries. 

Freight. —  Goods  in  course  of  transportation,  whether 
by  land  or  water ;  also,  the  sum  charged  for  such  trans- 
portation. 


252 


VOCABULARY  OF  MERCANTILE  TERMS 


Fund. — To  collect  the  floating  debt  (see  "  Floating 
Debt  ")  of  a  corporation  or  government  into  a  more  or  less 
permanent  form  at  a  fixed  rate  of  interest,  and  usually  pay- 
able within  a  fixed  period  of  years  ;  any  accumulated  stock 
or  capital  set  apart  for  a  special  purpose.  (See  "  Sinking 
Fund  ");  in  the  plural,  i.  e.,  "the  funds,"  the  interest-bear- 
ing national  debt  of  Great  Britain. 

Furniture.  —  The  movable  articles  of  a  store  or  office, 
as  chairs,  tables,  carpets,  etc. 

Goods. —  Any  commodities  or  articles  of  trade  collect- 
ively, wares,  merchandise. 

Good  Will. —  The  advantage  or  benefit  which  is  ac- 
quired by  an  establishment,  beyond  the  mere  value  of  the 
capital  stock,  funds,  or  property  employed  therein.  Good 
will  may  arise  through  the  use  of  a  particular  name  or 
trade  mark,  through  extensive  advertisement,  or  through 
any  other  agency  that  creates  a  favorable  reputation  for 
the  business. 

Grant. —  The  conveyance,  by  government,  of  large 
bodies  of  land  to  individuals  or  corporations;  the  body 
of  land  thus  conveyed. 

Gross. —  Twelve  dozen  ;  in  bulk,  including  cask,  box, 
wrappings,  etc.,  as  the  gross  weight  of  goods;  whole  cost 
or  amount  including  charges,  as  gross  cost,  gross  sales,  the 
opposite  of  net. 

Guaranty. —  A  security  against  loss ;  a  contract  in 
which  one  person  undertakes  to  insure  the  performance 
*>f  an  agreement  made  by  another.  (Also  written  "Guar- 
antee.") 

High  Seas. —  The  portion  of  the  ocean  that  is  not  within 
the  jurisdiction  of  any  nation  ;  as  a  general  rule,  that  por- 
tion that  is  not  within  a  marine  league  (about  three  miles) 
of  the  general  shore  line. 

Honor. —  To  accept  or  pay  a  note,  draft,  or  other  obli- 
gation when  presented,  or  when  due. 

Hypothecate. —  To  pledge  negotiable  securities,  stocks, 
bonds,  or  the  like,  for  the  payment  of  a  debt,  or  as  security 
for  a  loan  ;  to  mortgage  without  giving  possession. 

Imports. —  The  general  commodities  which  are  brought 

into  a  country  from  other  countries. 

Importer.—  One  engaged  in  the  business  of  importing 
goods  from  a  foreign  country. 

Income. —  The  annual  receipts  of  a  person  or  corpora- 
tion ;  gains  from  any  source. 

Indemnify. —  To  reimburse,  to  recompense  for  any  loss 
or  injury  ;  to  make  sure  against  future  loss  or  liability. 

Indemnity. —  That  which  is  given  to  indemnify  against 
Joss,  either  actual  or  possible.     (See  "Indemnify.") 

Indenture. —  Any  formal  writing  containing  a  contract. 

Indorsement. —  Act  of  writing  one's  name  on  the  back 
of  a  check  or  other  commercial  paper. 

Insolvency. —  Inability  to  pay  one's  debts. 

Installment. —  One  of  several  parts  into  which  a  debt 
is  divided  for  payment  at  different  times. 

Installment  Plan. —  A  widely  introduced  system  of 
selling  various  kinds  of  property  as  town  lots,  furniture, 
bicycles,  pianos,  etc.,  by  which  the  dealer  retains  the 
ownership  of  the  thing  sold,  until  it  is  paid  for,  the  pay- 
ments being  made  in  installments,  and  the  seller  retaining 
the  right  to  retake  the  article  without  repaying  any  part 
of  what  has  been  paid,  should  the  buyer  make  default  in 
any  installment. 

Insurance. —  Guaranty  of  whole  or  partial  indemnity 
against  loss  of,  or  damage  to  property,  loss  of  life  or 
health,  or  injury  to  body  ;  the  sum  paid  for  such 
guaranty. 

Insurance  Policy. —  The  formal  instrument  containing 


the  contract  between  an  insurance  company  and  the  per- 
son whose  life  or  property  is  insured. 

Interest.—  A  sum  charged  for  the  use  of  money  or  its 
equivalent. 

Intestate. —  Applied  to  deceased  persons  who  have 
made  no  provision  by  will  for  the  disposal  of  their  prop- 
erty ;  the  term  is  also  applied  to  any  property  not  thus 
disposed  of,  as  an  intestate  estate. 

Investment. —  The  act  of  expending  money  or  other 
capital  for  property  with  a  view  to  future  gain  ;  the  total 
money  or  other  capital  that  one  invests  in  a  business. 

Invoice  Book. —  A  book  for  filling  or  copying  the  several 
invoices  of  goods  purchased  by  a  merchant. 

Jettison. — The  throwing  overboard  of  goods  in  order 
to  ease  a  ship  in  time  of  storm  or  danger.  Also  written 
jetsam,  jetsen,  jetson,  etc. 

Jobber. —  A  commercial  "  middleman  "  who  buys  goods 
of  the  importer  or  manufacturer,  and  sells  to  the  whole- 
saler or  to  the  retail  dealer. 

Job  Lot.  — A  quantity  of  goods  of  different  kinds  or  of 
different  values,  that  are  sold  as  a  whole,  usually  without 
invoicing  and  at  a  comparatively  low  price. 

Joint  Stock  Company. —  A  species  of  partnership  in 
which  the  business  is  conducted  similarly  to  that  of  cor- 
porations. Joint  stock  companies  are  unchartered,  do  not 
use  a  common  seal,  and  as  a  rule,  cannot  exercise  general 
corporate  rights.  Their  powers  and  privileges  depend 
upon  the  statutes  of  the  several  states.  Owing  to  the 
facility  with  which  corporations  may  be  formed  in  most  of 
the  states,  joint  stock  companies  are  becoming  obsolete  in 
the  United  States. 

Jurisdiction.—  The  right  of  a  court  to  try  a  case  ;  the 
territory  within  which  the  power  of  a  court  is  exercised. 

Judgment.— The  judicial  decision  or  decree  of  a 
court ;  the  document  setting  forth  such  decree  especially 
applied  to  judicial  awards  in  civil  causes ;  hence,  a  debt 
ascertained  and  supported  by  a  judicial  decision. 

Judgment-note. —  A  non-negotiable  promissory  note  in 
the  usual  form,  but  containing  a  clause  giving  to  the  payee 
a  power  of  attorney  to  appear  before  a  court  and  confess 
judgment  in  behalf  of  the  maker  of  the  note.  The  holder 
of  a  judgment-note  is  relieved  from  the  necessity  of  bring- 
ing suit  for  its  collection,  in  case  the  maker  fails  to  pay  it 
at  maturity. 

Leakage. —  An  allowance  of  a  certain  rate  per  cent,  for 
the  leaking  of  casks  or  waste  by  leaking. 

Lease. —  A  written  contract  transferring  the  possession 
and  right  to  occupy  and  use  lands,  tenements,  or  other 
real  property  for  a  fixed  period  of  time,  and  for  a  specified 
compensation  to  the  owner  ;  to  grant  or  give  possession  of 
by  lease,  as  to  lease  a  farm  to  a  tenant ;  to  rent  or  take  by 
a  lease,  as  to  lease  a  house  from  the  owner. 

Legacy. —  Money  or  other  property  left,  by  will ;  a  be- 
quest. 

Legal  Tender. —  A  legal  offer  of  money  in  satisfaction 
of  a  debt ;  money  which  may  be  legally  offered  in  satis- 
faction of  a  debt,  as  between  private  individuals,  firms 
and  corporations.  All  money  of  the  United  States  is  a 
legal  tender  except  national  bank-notes.  The  silver  coins 
of  the  United  States  of  a  denomination  less  than  one  dollar 
are  a  legal  tender  in  sums  not  exceeding  ten  dollars.  The 
five-,  three-,  and  one-cent  pieces  are  a  legal  tender  in  sums 
not  exceeding  twenty-five  cents.  Foreign  coins  or  bills 
are  not  a  legal  tender  in  the  United   States. 

Letter  of  Credit. —  A  letter  issued  by  the  banker  for 
the  purpose  of  giving  the  holder  a  credit  not  exceeding 
a  specified  amount,  with  one  or  more  banks  in  distant 
countries.     It  is  usually  issued  to  travelers,  and  to  enable 


VOCABULARY  OF  MERCANTILE  TERMS 


253 


them  to  avoid  the  Inconvenience  of  carrying  considerable 
sums  of  money. 

Liability.— A  debt ;  that  for  which  one  is  liable. 

License. —  Legal  authority  in  proper  form  to  engage  in 
gome  business  or  perform  some  act  named  in  the  license. 

Lien.— The  legal  right  to  retain  possession  of  property 
belonging  to  another  until  some  debt  or  charge  arising  in 
connection  with  the  property  shall  have  been  paid. 

Limited. —  A  term  affixed  to  the  name  of  a  corporation 
(or,  in  some  States,  a  joint  Stock  Company)  and  signify- 
ing that  the  liabilities  of  the  individual  stockholders  are 
limited  to  a  specified  sum,  usually  to  the  par  value  of  the 
shares  held  by  each. 

Liquidation.  —  Payment  of  debts  or  claims. 

Manifest.—  A  lisc  of  a  ship's  cargo. 

Maturity.— The  time  at  which  a  note,  draft,  or  other 
obligation  falls  due. 

Maximum.—  The  highest  price  or  rate. 

Mercantile  Agency. —  A  concern  whose  business  it  is 
to  supply  information  relative  to  the  financial  standing, 
credit  rating  and  general  business  reputation  of  persons, 
firms,  or  corporations  that  are  engaged  in  mercantile 
enterprises. 

Merchandise.  —  Any  movable  object  of  trade  or  traf- 
fic ;    specifically,  the  goods  offered  for  sale  by  a  dealer. 

Merchants'  Exchange. —  A  place  where  merchants, 
bankers,  brokers,  and  other  business  men  of  a  city  meet  to 
transact  business,  discuss  the  interests  of  trade,  or  gather 
information  regarding  any  line  of  business. 

Minimum. —  The  lowest  rate  or  price. 

Money.— Originally,  any  co?n  bearing  a  government 
Stamp,  now  extended  to  include  bank  bills,  government 
notes,  or  other  substitutes  for  money  that  may  be  used  for 
the  final  satisfaction  of  debts,  but  not  including  checks, 
notes,  or  other  private  obligations ;  in  a  broader  sense, 
anything  that  is  used  as  a  general  medium  of  exchange ; 
thus  among  the  Virginian  colonists,  tobacco  was  used  as 
money. 

Monopoly. —  An  exclusive  right  to  carry  on  a  traffic. 
The  right  may  be  conferred  by  law,  as  in  the  case  of  a  pat- 
ented article,  or  it  may  arise  from  exclusive  possession  of 
the  means  for  obtaining  the  monopolized  commodity. 

Mortgage. —  A  contract  by  which  the  payment  of  a 
debt  is  secured  by  the  conditional  transfer  of  the  title  to 
property. 

Net. —  Lowest;  an  amount  not  subject  to  further  de- 
ductions, as  net  weight,  net  price,  net  profit,  etc. 

Negotiate. —  To  arrange  for  or  bring  about  a  purchase, 
sale  or  loan. 

Negotiable  Paper. —  In  law,  any  evidence  of  a  debt,  as 
a  check,  note,  draft,  or  other  instrument  which  the  holder 
may  transfer  to  another,  who  shall  have  the  right  to  en- 
force payment  in  accordance  with  the  terms  set  forth  in 
the  instrument,  and  regardless  of  the  equities  subsisting  be- 
tween the  original  parties.  In  order  that  full  negotiability 
may  attach  to  an  instrument,  it  must  be  obtained  in  good 
faith  and  for  value,  and  before  its  maturity. 

Notary  or  Notary  Public. —  A  public  official  who  is  spe- 
cially authorized  to  acknowledge  instruments  under  seal, 
protest  commercial  paper  for  non  payment,  administer 
oaths,  etc.  '  In  the  United  States,  notaries-public  are  state 
officers,  and  are  usually  appointed  by  the  governor  and  at 
his  discretion. 

Note. —  Any  written  promise  to  pay  money. 

Open  Account. —  An  unsettled  or  running  account. 

Open  Policy. —  An  insurance  policy  in  which  the  value 
of  the  property  covered  by  it  is  not  fixed. 

Option.— A  stockbroker's  term  for  the  privilege  of 


taking  or  delivering  on  a  future  day  a  certain  amount  of 
given  stock  at  a  price  agreed  upon.  An  option  of  calling 
for  the  delivery  of  stock  is  known  as  a  "  call ;  "  an  option 
of  delivering  stock,  a  "put."  Both  are  called  "futures" 
and  in  many  states,  transactions  of  this  class  are  forbidden 
by  law. 

Outlaw. —  To  become  voidable  through  the  statute  of 
limitations.  Said  of  debts  that  have  not  been  collected 
within  the  time  allowed  by  law. 

Overdraft. —  The  amount  by  which  a  bank-check  or 
draft  exceeds  the  bank  balance  to  the  credit  or  the  drawer; 
a  draft  which  exceeds  in  amount  the  bank-balance  against 
which  it  is  drawn  ;  the  resources  of  a  bank,  consisting  of 
debts  due  the  bank  by  depositors  who  have  overdrawn 
their  accounts. 

Par. —  Equality  of  commercial  and  face  value,  thus 
stocks  or  other  commercial  paper  that  sells  for  its  face  or 
issue  value,  is  said  to  be  at  par;  if  sold  below  this  value, 
below  par;  if  above  this  value,  above  par. 

Partnership. —  The  relation  between  individuals  whd 
unite  either  their  property,  their  services,  or  their  credit 
for  the  purpose  of  conducting  some  enterprise  for  their 
mutual  advantage. 

Pass  Book. —  A  book  in  which  a  trader  enters  the 
articles  sold  on  credit,  and  then  passes,  or  sends  it  to  the 
purchaser ;  a  bank-book. 

Pawnbroker. — One  who  makes  a  business  of  loaning 
money  that  is  secured  by  a  pledge  of  personal  property, 
which  pledge  is  retained  by  the  lender  if  the  money  is  not 
paid  within  a  prescribed  time. 

Payee. —  The  person  to  whom  a  note,  check,  or  other 
commercial  paper  is  payable. 

Postdate. —  To  put  a  date  on  a  document  later  than  the 
actual  date  on  which  it  was  written. 

Posting.— Transferring  the  debits  and  credits  from 
the  Journal  or  other  books  to  the   Ledger. 

Power  of  Attorney. —  An  instrument  by  which  one 
person  authorizes  another  to  do  certain  acts  for  him,  as  to 
make  contracts,  sign  deeds,  issue  checks,  etc. 

Premium. —  Amount  in  excess  of  par  ;  the  sum  charged 
for  insurance. 

Price  Current. —  A  regularly  published  price-list  of  the 
general  commodities  that  have  been  sold  in  the  market 
during  a  given  period. 

Principal. —  The  person  for  whom  an  agent  acts;  sum 
upon  which  interest  is  charged. 

Protest. —  A  formal  declaration,  usually  by  a  notary 
public,  that  demand  has  been  made  for  the  payment  of  a 
note,  draft,  or  other  commercial  obligation,  and  that  pay- 
ment has  been  refused. 

Quotations. —  The  published  market  price  of  commodi- 
ties, stocks,  bonds,  etc. 

Rating. —  Commercial  reputation  or  standing  of  a  busi- 
ness firm,  as  estimated  and  published  by  a  recognized  mer- 
cantile agency.     (See  "Mercantile  Agency.") 

Real  Estate. —  Land  and  such  fixtures,  improvements, 
growing  crops,  buildings,  etc.,  as  go  with  the  land  when  it 
is  sold. 

Rebate. —  An  allowance  by  way  of  discount ;  a  deduc- 
tion from  a  gross  amount. 

Receipt. —  A  written  acknowledgment  of  having  re- 
ceived something  specified,  with  date,  purpose,  signature, 
and  such  other  particulars  as  the  case  requires. 

Receiver. —  A  person  appointed  by  a  court  to  take  the 
custody  and  management  of  property  involved  in  any  liti- 
gation, or  for  the  purpose  of  closing  up  the  business  of  a 
firm  or  corporation. 

Refund,  —  To  pay  back  or  return  money ;  to  convert  9 


254 


VOCABULARY  OF  MERCANTILE  TERMS 


funded  debt  into  a  new  debt,  and  usually  at  a  lower  rate  of 
interest. 

Registered  Letter.— A  letter  for  which,  during  its 
transmission,  each  postal  employee  gives  a  receipt  when  it 
passes  into  his  hands,  thus  making  its  preservation  and 
delivery  more  certain. 

Remittance. —  Act  of  transmitting  a  sum  of  money  or 
its  equivalent  to  another  place  ;  the  money  sent. 

Renewal. —  The  act  of  giving  a  new  note,  acceptance,* 
or  other  obligation  for  one  that  is  due. 

Retail.— To  sell  in  small  quantities. 

Revenue. —  Income  of  a  state  or  nation  derived  from 
duties,  taxes,  or  other  sources. 

Revoke. —  To  repeal  or  cancel;  to  recall  authority,  as 
to  revoke  a  will,  or  an  agency. 

Salvage. —  A  legal  allowance  made  to  those  who,  al- 
though under  no  obligations  to  do  so,  rescue  a  ship  and 
its  cargo  or  other  property  from  danger  or  destruction  by 
shipwreck,  fire,  etc. 

Shipment. —  A  quantity  of  goods  delivered  at  one  time 
for  transportation  ;  a  consignment. 

Sight. —  Upon  presentation,  as  to  draw  a  draft  payable 
it  sight. 

Signature. —  The  name  of  a  person  written  by  himself, 
or  any  mark  or  sign  executed  by  him,  and  representing  his 
name  ;  the  authoritative  signed  name  of  a  person,  firm,  or 
corporation,  and  which  if  authoritatively  affixed  to  any 
document,  is  binding  upon  the  person  or  firm  which  the 
signature  represents. 

Signature-Book.—  (See  page 3.) 

Single  Entry. —  A  system  of  bookkeeping  in  which  but 
one  record,  or  entry  is  made  for  each  transaction. 

Sinking  Fund. —  A  fund  set  apart  from  the  earnings 
of  a  corporation,  or  from  the  revenues  of  a  government  or 
municipality,  for  the  extinction  of  a  bonded  or  other  debt. 

Silent  Partner. —  A  dormant  partner  ;  see  "  Dormant." 

Solvent. —  Financially  sound  ;  able  to  pay  all  liabilities. 

Spot  Cash, —  Terms  of  sale  where  goods  are  to  be  paid 
for  on  delivery. 

Statement. —  An  itemized  list  of  the  debits  and  credits 
of  a  personal  account,  a  summary  of  a  business  covering  a 
certain  period  of  time. 

Stipulation. —  A  special  part  of  a  bargain  or  contract, 
as  a  stipulation  that  rent  is  to  be  payable  quarterly. 

Stock. —  Amount  invested  in  a  business;  goods  on 
hand ;  the  capital  of  a  corporation  as  represented  by  the 
shares  ;  often  in  the  plural,  as  a  dealer  in  stocks. 

Stoppage. —  The  right  of  a  shipper  of  goods  sold  on 
credit  to  resume  possession  of  them  during  their  transit, 
or  while  they  are  in  the  carrier's  warehouse,  and  prior  to 
their  delivery  to  the  buyer. 

Storage. —  A  charge  for  keeping  or  storing  goods  in  a 
warehouse  or  other  place  of  safe  keeping. 

Sundries.— Miscellaneous  small  things;  in  journaliz- 


ing, a  term  indicating  that  several  accounts  are  involved 
in  one  entry. 

Surety. —  A  person  who  renders  himself  responsible  foi 
the  performance  of  another's  contracts,  the  payment  o? 
hi?  debts,  or  for  his  appearance  in  court;  security. 

Suspense  Account. —  An  account  for  the  collection  of 
entries  of  sales  made  to  unknown  parties. 

Syndicate. —  A  combination  of  capitalists  who  unitp 
for  the  purpose  of  carrying  out  some  special  financial 
undertaking. 

Tare. —  A  deduction  from  the  gross  weight  of  goods,  of 
an  amount  approximately  equal  to  the  weight  of  the  box, 
crate,  or  other  package  containing  them. 

Tariff. —  A  scale  or  table  of  charges  ;  a  list  or  table  of 
duties  to  be  paid  on  imported  goods. 

Teller.—  An  employee  in  a  bank  whose  business  it  is 
either  to  receive  or  to  pay  money  over  the  counter.  There 
are  usually  two,  a  receiving  teller  and  a  paying  teller. 

Tender. —  An  offer.    (See  "Legal  Tender.") 

Terms. —  The  conditions  under  which  goods  are  sold, 
usually  with  reference  to  the  term  of  credit  and  the  dis 
counts  to  be  allowed. 

Trade  Mark. —  A  distinguishing  mark  or  device,  usu- 
ally copyrighted,  that  the  manufacturer  of  goods  impresses 
upon  his  goods,  or  labels,  or  inserts  in  his  advertisements. 

Tonnage.—  The  carrying  capacity  of  a  ship. 

Trust. —  A  union  of.  several  corporations  for.  the  pur- 
pose of  placing  the  entire  business  under  one  management 

Trust  Certificate. —  A  certificate  given  to  a  stockholder 
when  he  transfers  his  stock  to  a  trust. 

Trust  Company.  —  An  incorporate  concern  that  re- 
ceives deposits  which  it  loans  on  stocks,  bonds,  or  other 
safe  security.  Trust  companies  often  undertake  the 
management  of  funds  belonging  to  large  estates,  or  act 
as  financial  agents  for  municipalities  and  other  cor- 
porations. 

Underwriter. —  One  who  insures  or  carries  on  the  busi- 
ness of  insurance  ;  an  insurance  company. 

Usury. —  An  interest  charge  exceeding  the  maximum 
rate  allowed  by  law.     Some  states  have  no  usury  laws. 

Valid. —  Good  or  sufficient  in  point  of  law;  as  a  valid 
contract. 

Vendor. —  The  person  who  vends,  or  sells  any  article. 
A  dealer. 

Void.—  Of  no  effect  legally  ;  not  enforceable. 

Voucher. —  Anything  that  evidences  the  correctness  of 
accounts  ;  a  receipt,  canceled  check,  or  other  evidence  of 
payment. 

Waive.— To  relinquish  a  legal  right. 

Wares. —  Goods  especially  manufactured  ;  merchandise 
of  any  kind. 

Way  Bill. —  A  detailed  list  of  the  goods  in  a  shipment 
sent   by  railroad. 

Wharfage.—  A  charge  for  the  use  of  a  wharf. 


COMMERCIAL    KBBRE1ZIKTIONS 


A.  1 first  quality 

acc'c acceptance 

A.  D.    The  Year  of   our 
Lord. 

adv adventure 

ad advertisement 

acct account 

Act.  Sales  . . .  Account  Sales 
Acct.  Cur Account  Cur- 
rent. 
Agt agent 

A.  M forenoon 

amt amount 

Art article 

Asst Assistant 

j,v average 

Asst.  or  as'd assorted 

tgm't agreement 

Bal Balance 

B  Rend Bill  Rendered 

B.  S Bill  of  Sale 

B.  30.    Buyer's  Option  to 

purchase  within  30  days. 

B.  Flat without  Interest 

B.  B Bill  Book 

B.  C between  calls 

bbl.,  brl.  or  B,  «  .. . .  .barrel 

B.  L Bili  of  Lading 

B.  Pay Bills  Payable 

B.  Rec Bills  Receivable 

Bk bank 

Bk.  B Bank  Book 

Blk black 

Bgs .bags 

Bdls bundles 

Bis bales 

Bkts baskets 

Bot bought 

Brot brought 

B  O..  or  b.  o.  buyer's  op- 
tion. 

Bu bushels 

Bxs boxes 

Cap Capital 

Cs cases 

Com i  commission 

|  commercial 

Cons't  or  Con.  Consignment 

Cr creditor  or  crate 

cts cents 

Ctg cartage 

Cwt hundred  weight 

Dep't Department 

d pence 

do the  same 

D.B Day  Book 


dep deposit 

dft.  or  dr draft 

Div „ dividend 

Dis discount 

doz dozen 

Dr debtor 

dray.^ drayage 

ds days 

ea each 

E.  E Errors  excepted 

E.  &  O.  E Errors  and 

omissions  excepted. 

end endorse 

Eng English 

Ent entry 

Ent'd entered 

Exch exchange 

Exp. .  .Expense  or  Expenses 
Ex  Divi.    .  .Without  divi- 
dends or  flat. 

Fav favor 

Fcp foolscap 

Fig'd figured 

fir firkin 

F.  O.  B.,  or  f.  o.  b.  ..Free 
on  Board. 

Fol folio 

Fwd forward 

Fr French  or  Francs 

frt freight 

ft feet  or  foot 

gal gallon 

gr grain  or  gross 

guar guarantee 

hf half 

hhd hogshead 

hdkf handkerchief 

hund hundred 

I.  B Invoice  Book 

I.  I.  B   ...Inward  Invoice 
Book. 

i.  e that  is 

in..     . inches 

inv invoice 

Inv't  or  Inv'ry.. .  .inventory 

Ins insurance 

Insol insolvency 

Int interest 

Inst present  month 

I.  O.  TJ I  owe  you 

Jr Junior 

J.  F Journal  folio 

L.  B Letter  Book 

lbs pounds 

L Ledger 

L.  F. ,  .Ledger  folio 


mf'd manufactured 

M thousand 

Mem memorandum 

M.  Bds mortgage  bonds 

Mo month 

Mos months 

M.  A month  after  date 

mfg manufacturing 

man'f manufacture 

Mdse merchandise 

MS.,  MSS .manuscripts 

mols,,  or  Mis molasses 

N.  B Note  Book 

N.  B take  notice 

N  L New  Ledger 

No number 

Nos numbers 

N.  P Notary  Public 

O.  A Old  Account 

O.  K All  right 

O.  I.  B.,  Outward  Invoice 
Book. 

oz ounce  or  ounces 

P.,  pp page,  pages 

P.  B Pass  Book 

P.  O.  D Pay  on  delivery 

P.  C.  B. . .  .Petty  Cash  Book 

Pay  t payment 

Pes.,  or  ps pieces 

Pd paid 

Pkgs packages 

Pref preferred 

Per by 

pr pair 

prs pairs 

P.  S postscript 

pts pints 

Pun puncheon 

P  &  L Profit  and  Loss 

per  cent by  the  hundred 

P.  O Post  Office 

prox .next  month 

qr quarter 


qts quarts 

qnts quintals 

Ry Railway 

R.  W Regular  Way  or 

Rail  Way. 

R.  R Railroad 

R.  Bds Railroad  bonds 

Rec'r .Receiver 

Rec'd  Pmt Received 

Payment. 

Rect receipt 

Rs. ,  or  rls roils 

S^B ...Sales  Book 

s shillings 

Schr Schooner 

Sh. .ship  or  shares 

Shipt Shipment 

sig signature 

sk sack 

St.  dr sight  draft 

Supt Superintendent 

stbt .  „ . . . steamboat 

str steamei 

sunds sundries 

S.  O.,  or  s.  o seller's 

option. 

stor storage 

super.,orS.  P superfine 

m  d  \  Time  Book 

x-  D }  Trial  Balance 

T  ,  j  telegraph 
}  telephone 

Treas Treasurer 

tc. tierces 

U.  S . . United  States 

ult last  month 

ves vessel 

via By  the  way  of 

viz To  wit,  namely 

W.  B ..Way  Bill 

W.  N without  notice 

wt .weight 

yds yards 

Yr year 


COMMERCIAL  CHARACTERS 


@. at 

% account 

fo Percentum  or  by 

the  100. 

c/o care  of 

^ cents 

$ dollars 

£ pounds  sterling 

# number,  as  #  25 

# ' pounds,  as  25  # 


^ check  mark 

/p% old  account 

*tfy% new  account 

51.. . five  and  one  fourth 

72. . .  .seven  and  two  fourth* 

63 six  and  three  fourths 

(These  combinations  are 
used  in  marking  dry-goods. 
The  small  figure  at  the  righfc 
indicates  fourths.) 


[255] 


Q    UODJO 


MP 


54!?47 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


